 BackCLIENT ADVISORY - January 18, 2008
Class Action Complaint Against Default Servicing Company in the Southern District of Texasby Alan C. Hochheiser, Esq. and Laura R. Faulkner, Esq.This week bankruptcy debtors in the Southern District of Texas filed a complaint against a default servicing company alleging violations of the Bankruptcy Code, the Bankruptcy Rules, the Federal Criminal Code and various state laws. The complaint seeks class action relief against the defendant.
The allegations in the case center around the legal fees incurred when a default servicer hires an attorney to represent the mortgage servicer in a bankruptcy proceeding. The complaint alleges that the Default Servicer receives an "illegal kickback" when it recovers a portion of the attorney fees that the creditor attorney charges the mortgage servicer. The mortgage servicer then passes that expense on to the debtors.
The outcome of this litigation will not be determined for quite some time; however, it may significantly alter the way in which mortgage servicers and default servicers conduct business in the future. Weltman, Weinberg & Reis Co., L.P.A. will continue to monitor the status of this case and provide you with updates. In addition, we will continue to provide you with breaking news in the Real Estate Default and Bankruptcy arenas. Alan Hochheiser
Partner, Bankruptcy
(216) 739-5649
ahochheiser@weltman.com
Laura R. Faulkner
Associate, Bankruptcy
(513) 723-2210
lfaulkner@weltman.com
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