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Foreclosure foul-up could cause court penalties for lawyers

A judge says the firm gave false information; state also investigating.

A law firm under state investigation for its handling of foreclosure cases could face court sanctions in St. Johns County for giving a judge false information about who owned a mortgage.

Circuit Judge J. Michael Traynor  threw out a foreclosure suit this month after concluding the plaintiff listed in a case filed by Florida Default Law Group never owned the note.

Lawyers compounded that problem, the judge decided, by filing paperwork later that named the real mortgage holder, HSBC Bank, but falsely described the bank as a “successor” to the original plaintiff, U.S. Bank National Association.

Because U.S. Bank really never held the note, what the lawyers were claiming wasn’t true, the judge said.

“The court was misled,” Traynor wrote in an order dismissing the case. He added that judges “should be able to confidently rely on the statements made by counsel.”

“As officers of the court, attorneys should ensure that the facts they represent as true … are correct and accurate,” Traynor wrote.

The ruling doesn’t stop the real mortgage holder from filing a new suit against homeowners William and Lauren McLeod, and the judge said the whole problem may have just been a matter of sloppy preparation for the case.

But the case reflects a broader problem of faulty information being used in lawsuits where people’s homes are at stake, said Chip Parker, a Jacksonville attorney representing the McLeods.

“This happens all the time in various forms,” Parker said, arguing that a number of South Florida law firms have become “foreclosure mills” designed to handle mass volumes of lawsuits with little regard to details.

“They will do whatever they have to do … without regard to the truthfulness of what they’re filing,” said Parker, whose firm asked for the dismissal.

Many people never challenge foreclosures, he said, so cases that couldn’t win at trial sail through anyway.

A spokeswoman for Florida Default, Lisa Nason, said by e-mail Tuesday it would be “inappropriate” to discuss the case. The Tampa-based company was identified last month by the Florida Attorney General’s Office as being the subject of a civil investigation by its economic crimes unit.

A statement posted on the agency’s website said the law firm, described as one of the state’s biggest handling foreclosures, “appears to be fabricating and/or presenting false and misleading documents in foreclosure cases.”

The state’s investigation includes questions about a kind of document called an “assignment of mortgage,” a form used to prove a mortgage has been sold or transferred from one owner to another.

After the McLeods were sued for their home in Julington Creek Plantation in 2008, Florida Default created an assignment of mortgage saying the note had been transferred from Wells Fargo Bank, the original lender, to U.S. Bank, which was acting as a trustee for a bundle of investment certificates backed by mortgages including one for the McLeod home. But that document couldn’t be accurate if Traynor is correct that U.S. Bank never held the note.

Parker said documents filed with the Securities and Exchange Commission identify HSBC as the trustee.

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US Bank v McCleod Judge Traynor Dismissed With Prejudice