PA Fraudclosure Scandals Taint Thousands of Court Actions

Allegations of legal misconduct and fraud mount as attorneys general and bank regulators investigate lenders and servicers. Charges of unauthorized practice of law by low level employees in a Philadelphia foreclosure mill that represented lenders and servicers in thousands of foreclosures is the latest wrinkle in the ongoing saga of the U.S. housing crisis. Goldbeck McCafferty & McKeever has come under fire on several fronts in actions that could have sweeping impact on the legal system and further erode consumer confidence in housing market recovery.

Those allegations came on the heel of scathing reprimand from a bankruptcy court judge in Pittsburgh directing the same firm to self-report to the Disciplinary Board of the Supreme Court of Pennsylvania. U.S. Bankruptcy Judge Thomas Agresti filed two blistering opinions, rebuking the firm and the lender it represented, Countrywide Home Loans, in a foreclosure that led a Pittsburgh-area woman to file for bankruptcy in 2001.

Agresting said a Goldbeck attorney knowingly gave the court phony lender documents to bolster its foreclosure claim saying “the evidence that (the attorney) lied was considerable.”

Loughren’s 78-page lawsuit states two objectives — defending the legal profession, and pursuing a remedy for those facing foreclosure and those who have already paid attorneys fees or lost their homes in actions filed by the Philadelphia firm.

“As one court has stated, ‘It must be borne in mind that it has always been held that a professional man has standing to prevent the improper invasion of his profession,’” the lawsuit says.

Lawsuit crosshairs are fixed on the law firm and 36 support staff, including notaries, charging they researched, wrote, and filed foreclosure actions that were never reviewed or signed off by the firm’s lawyers.

Loughren’s complaint alleges:

1. The firm filed suits without investigation by attorneys of the underlying facts in FHA cases, which violates FHA regulations;
2. The non-lawyers also prepared and filed pleadings in Bankruptcy Court without attorney supervision, which the complaint states, is also the unauthorized practice of law;
3. “Every foreclosure action pending in every Court of Common Pleas in this Commonwealth that has been prepared by and filed by the Non-Lawyer Defendants, without attorney review, should be dismissed on the basis that the Court lacks jurisdiction over the lawsuit.” In addition, according to the filing, GMM should not be permitted to collect and retain attorneys fees for work performed by paraprofessionals without attorney supervision – especially useful in a Chapter 13 bankruptcy.

Loughren makes the following requests in his lawsuit:

1. Declare that the conduct of non-lawyers at GMM constitutes the unauthorized practice of law;
2. Grant an injunction barring non-lawyers at GMM from engaging in practice of law in Pennsylvania;
3. Enjoin continued prosecution of cases filed by non-lawyers in violation of Pennsylvania law;
4. Iissue a rule to show cause why all pending foreclosure actions filed by GMM should not be dismissed;
5. Issue a rule to show cause why attorneys fees should not be accounted for and returned to homeowners;
6. Issue a rule to show cause why every judgment entered in favor of defendant clients should not be opened or vacated;
7. Enjoin defendants from supporting claims with false affidavits;
8. Enjoining the notaries from notarizing documents in violation of statutory requirements;
9. Enjoining all non-lawyers at GMM from signing their names to affidavits.