The largest mortgage foreclosure law firm in New York has agreed to pay $2 million and change its practices to settle a probe of the firm and its methods by the U.S. Attorney’s Office.

"In mortgage foreclosure proceedings, there are no excuses for sloppy practices that could lead to someone mistakenly losing their home,” said Preet Bharara, U.S. Attorney for the Southern District of New York. “Homeowners facing foreclosure cannot afford to have faulty paperwork or inadequate evidence submitted, and today’s agreement will help minimize that risk.”

The agreement requires a general overhaul of the practices of the suburban Buffalo-based firm of Steven J. Baum, P.C., in connection with its filings in mortgage foreclosure actions. The agreement also prohibits the firm from engaging in certain practices related to the Mortgage Electronic Registration Systems Inc. ("MERS"), a subscription-based electronic registry for lenders and other entities that tracks ownership interests in mortgages.

MERS members agree to appoint MERS as their agent on all mortgages they register. Until recently, employees of the Baum firm, with the consent of MERS, had been assigning mortgages on behalf of MERS, even though they had no connection to MERS whatsoever, which resulted in errors in its legal filings in state and federal court, Bharara said..

The settlement also requires the firm to:

• Take steps to inform courts of the nature of the assignments in pending foreclosure proceedings it is handling.

• Obtain appropriate affidavits from its clients attesting to the fact that they possess original notes or have conducted a diligent search and the original note could not be found.

•  Have experienced attorneys supervise the preparation of pleadings, and review and approve pleadings before they can be filed.
• Implement a 12-24 month training program for its attorneys that includes an overview of the foreclosure process in New York State and a review of the litigation procedures expected at the firm.
• Provide immediate notice to the government when objections are raised regarding the accuracy of certain court filings related to mortgage foreclosure proceedings.

Bharara said that with the agreement Baum acknowledges it made inadvertent errors in its legal filings in state and federal court, which it attributes to human error in light of the high volume of mortgage defaults and foreclosures throughout New York in the wake of the national subprime mortgage crisis.

The firm is paying $2 million in exchange for a release from any potential claims pursuant to the Financial Institutions Reform, Recovery, and Enforcement Act of 1989. The act authorizes the government to seek civil penalties for violations of, and conspiracies to violate criminal statutes involving financial fraud, including mail and wire fraud. Bharara said the release from liability does not preclude any other parties, including individual homeowners, from pursuing any rights they may have.