Miami Judge Threatens Major Mortgage Company Lawyers With Criminal Charges for Hiding Documents
Taber Andrew Bain / Flickr

Miami Judge Threatens Major Mortgage Company Lawyers With Criminal Charges for Hiding Documents

Update 12/14: Miami-Dade County Judge Beatrice Butchko moved forward today with criminal contempt-of-court charges against Ditech's lawyers. The attorneys say they plan to file an appeal.

Ditech, one of America's largest home-loan companies, achieved fame in the 1990s with TV commercials that showed its competitors complaining they had "lost another loan to Ditech." The company largely vanished during the 2008 housing crisis but has since rebounded and remains one of the largest mortgage-service firms in America. It brings in revenue in excess of $1 billion per year and handles thousands of home-foreclosure cases annually.

But in Miami, circuit court Judge Pedro Echarte Jr. has accused lawyers for the giant firm of hiding key documents — it's even possible those attorneys could face criminal charges after a hearing today. The documents in question suggest the company's lawyers might have lied about whether the company ensures payment balance data is accurate and its customers are getting foreclosed upon fairly.

Poor and/or negligent record-keeping was a major contributor to the 2008 housing crash. Four major banks, including JPMorgan Chase, reached an eye-popping $25 billion settlement with the U.S. Department of Justice in 2012 after the banks were found to be willfully "robo-signing" thousands of foreclosure documents every day without bothering to check them.

In a hearing at the Miami-Dade County Courthouse today, lawyers for Ditech will have to explain why they should not be held in contempt of court. A potential nonjury trial date has been set for February 1, 2018.

"The Defendants are hereby noted that this is now a criminal matter," Echarte warned Ditech's lawyers Yacenda Hudson and Amina McNeil in an order filed just before Thanksgiving. Echarte also accused one of Ditech's witnesses of giving false testimony during foreclosure proceedings in order to cover up the company's allegedly inadequate loan processes.

Neither the lawyers in question nor Ditech responded to New Times' multiple requests for comment sent earlier this month. The lawyers have since hired defense attorneys and filed multiple motions in attempts to kill the measure.

In court documents, Ditech attorneys argued that its lawyers acted ethically and that its representatives "should not have to defend themselves in criminal proceedings for actions taken while properly representing their clients." Ditech's lawyers claim the facts laid out in the judge's order "do not show (or even suggest)" anyone broke the law.

But Bruce Jacobs, a local foreclosure lawyer, AM radio host, and former Miami-Dade County prosecutor representing homeowners who were foreclosed upon, characterizes Ditech's actions in this case as an "attack on the integrity" of the court system.

"As a former prosecutor, I strongly believe banks should be presenting truthful evidence and should be punished if they were caught doing something no other party would be allowed to get away with, especially because they are banks," Jacobs tells New Times.

Ditech's largest competitor, Ocwen, has been the subject of multiple lawsuits from state governments and the federal Consumer Finance Protection Bureau (the government body set up to protect homeowners after the 2008 housing crisis) over mishandling this very same process, known as "loan boarding."

If companies mishandle their loan-boarding processes, there are real impacts for regular people: A mortgage servicer might buy policies from a different company and never know whether that company kept accurate records. The new company might then foreclose on a home without properly informing the homeowners or might try to repossess a home that's fully paid up.

The documents Ditech allegedly hid — employee training manuals — raise questions about the accuracy of the company's record-keeping processes nationwide.

The trouble in Miami began in September 2015, when Ditech tried to foreclose on a home at 11260 SW 157th Ct. in the Hammocks area of West Kendall. Ditech alleged the family that bought the home owed $287,675 on its mortgage. Ditech, under its former name (Green Tree), had bought the mortgage in question from another company.

In court, Jacobs asked Ditech how it knew the old company's records were accurate. Ditech representatives responded that the company uses an industry-standard "red flag" checking process, which prevents loans from being "boarded" into Ditech's systems if the old company's records are incorrect or incomplete. Ditech also said this process was laid out in its training manuals.

In court filings, Jacobs wrote that Ditech's statements piqued his interest: Ditech's process sounded nearly identical to that of the company's biggest competitor, Ocwen. (In fact, another Miami-Dade judge, Beatrice Butchko, called Ocwen's loan-boarding process a "legal fiction.") So Jacobs asked Ditech to produce evidence that its manuals require employees to check records of new mortgages.

But when Jacobs tried to obtain a copy of the training manuals, Ditech's lawyers refused to hand them over. The company suddenly claimed the documents were confidential and filed a flurry of legal motions in an attempt to prevent the training manuals from being disclosed to the court. Judge Echarte, frustrated, told Ditech that if it could not find a time to agree to a deposition with Jacobs, he would force both parties to meet at midnight on a weekend. Echarte jokingly assumed this threat would force the two parties to find a way to compromise and sort out their differences.

Instead, according to court documents, Ditech's lawyers walked into a deposition at midnight Sunday, July 23, and in "violation of the Court’s order, they refused to produce any training manuals or other documents requested" by the court. On November 16, Echarte again demanded Ditech turn over the manuals or face a second wave of possible contempt charges. At 11:59 a.m. that day, one minute before their time was set to expire, Ditech's attorneys finally submitted the materials.

It turns out the manuals mention no accuracy-checking process. Echarte claims the company willfully lied in court to protect itself.

"Plaintiff, Ditech Financial... appears to have willfully violated this Court's order to produce training manuals," Echarte wrote in a judicial order issued just before Thanksgiving. "The training manual produced on November 16, 2017, now appears to show that Ditech's standard business practice does not verify prior servicer's records for accuracy before boarding loans. The training manual produced appears to show that Ditech's witness, Christopher Ogden, gave false testimony in an effort to introduce the prior servicer's records into evidence under false pretenses."

Echarte, an experienced judge, was incensed. In his November 20 order, he told Ditech's lawyers to get their own lawyers.

"If any Defendant is found in Contempt of Court, because it is indirect criminal contempt, that Defendant may be facing jail, adjudication, probation, and/or other sanctions," Echarte wrote. "If any lawyer is found in contempt, the matter will be referred to the Florida Bar."

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