Building an empire, one home at a time
He operates the largest foreclosure law firm in the state, and these hard times have made Mark P. Harmon a very busy man. Some critics assail his tactics, but Harmon is unapologetic: Lenders, after all, need zealous lawyers, too.
Devenia Mack doesn’t know Mark P. Harmon personally, but the Newton lawyer is intimately involved in her housing crisis. His company, Harmon Law Offices, was hired by Wells Fargo Bank last year to seize Mack’s Westminster ranch house by foreclosure.
His son, Andrew, signed the paperwork that transferred the mortgage to Wells Fargo.
His title company stamped the document notifying Mack that the bank was taking her home.
And his auction company put the property up for sale.
Mack, a 46-year-old mother of five, went to court to fight back. She claimed Harmon’s law firm and auction company worked with Wells Fargo to begin the foreclosure process without technically owning the mortgage. Mack said she was in the midst of negotiating with the bank to lower her payments when she heard about the auction.
“I don’t know how it could have gotten that far when I did everything they told me to,’’ she said.
In October, a judge issued a preliminary injunction preventing the auction. The case is still pending.
Mack’s suit is one of more than 100 cases filed in Massachusetts superior and federal district courts since 2005 against Harmon Law Offices, by far the state’s largest legal firm specializing in foreclosures. In Boston alone last year, it handled 40 percent of all home foreclosures - about one a day, according to a Globe review of public records. Statewide, the company has advertised more than 15,600 foreclosure auctions scheduled between January 2010 and September of this year.
With a law office, title firm, and auction company under his umbrella, Harmon has assembled a network that can slice through the complexities of a foreclosure faster than most stand-alone legal firms - it’s a one-stop shopping center for banks and mortgage companies. A reputation for speed and efficiency has attracted major clients such as Bank of America Corp. and JPMorgan Chase - in addition to Wells Fargo - which hire Harmon Law to process thousands of cases annually. It is also one of just five Massachusetts law firms on a list that mortgage giant Fannie Mae uses to farm out business.
Critics - including consumer advocates, attorneys, and foreclosure law specialists - say the firm’s size and scope allow it to sometimes act like a bully, steamrolling over people’s rights to maximize profits. Among their allegations: Harmon Law has unfairly foreclosed upon homeowners who were in the process of renegotiating their loans, charged exorbitant fees, and used inaccurate or falsified paperwork.
Harmon Law also has defenders who say its attorneys do their best to perform work that can often be unpleasant.
Mark Harmon, 66, won’t talk about specific cases, but he doesn’t apologize for his profession. Harmon said he sympathizes with homeowners in crisis but can’t solve their money problems. Most of the people who resort to suing his company are misdirecting their anger, he said.
As Harmon sees it, he and his employees are simply doing the bidding of clients - banks and other lenders that are owed millions of dollars.
“They loaned people money. It is not being paid back, and they need to be represented, and it is required that we represent them zealously,’’ he said. “We also understand we are the local face of the potential foreclosures. We are the messenger, which makes us a target.’’
Indeed, the firm’s determination to get the job done can cause emotions to erupt, especially those of desperate homeowners. (It is why Harmon Law’s Newton offices are fortified with security glass.) Because when you peel away the layers of foreclosure paperwork and legalese, Harmon’s business comes down to getting people like Mack out of their homes and doing it as quickly as possible.
Harmon Law declined to disclose its financial information, but there are some standard pay guidelines for foreclosure proceedings in Massachusetts that show the business can be lucrative. Firms generally earn flat fees of $1,300 for each standard property taking. But they can tack on substantial additional charges for title work, auctions, real estate closings, and evictions. And when a foreclosure is contested, attorneys bill by the hour. (A recent statement from Harmon Law to a mortgage holder cited nearly $10,000 in legal fees and costs.) Homeowners are ultimately responsible for all foreclosure expenses, and lenders can sue them for any losses they incur.
In addition to being the state’s most prolific foreclosure processor, Harmon Law also leads in the number of legal challenges filed over home seizures. It is a defendant in more state and federal lawsuits in Massachusetts than the combined number of legal actions filed against three other top state foreclosure firms since 2005, according to a Globe review of court records. Currently, the firm is involved in about two dozen active suits. It has been dismissed from or has settled dozens of others.
In 2006, for instance, it paid $800,000 to end a federal class-action suit filed by two Boston-area homeowners who said the company charged them too much for foreclosure-related services, including legal fees and certified mail costs.
Gary Klein, a Boston attorney who represented the plaintiffs in that case, is also the lead attorney in a suit in US District Court in Boston that alleges Harmon Law, as well as other legal firms and some lenders, took back homes in Massachusetts without having the proper paperwork in place.
“The firm began handling so many foreclosures that details are ignored and basic individual fairness concerns are overlooked,’’ Klein said.
Massachusetts Attorney General Martha Coakley began investigating Harmon Law last year, looking into allegations of unfair and deceptive acts related to its foreclosure and eviction practices. Among the complaints: an allegation that it unlawfully attempted to seize the homes of borrowers with mortgages originated by Fremont Investment & Loan, a California company Coakley had sued alleging predatory lending practices. Coakley contends that Harmon Law violated a court order requiring lenders to let her review any foreclosure filed against homeowners whose first mortgages originated with Fremont.
Despite the pile of lawsuits, some Massachusetts lawyers who represent people struggling to keep their homes say Harmon Law shouldn’t be singled out as a major contributor to the foreclosure mess.
Howard Potash, a Worcester attorney, said Harmon’s lawyers are usually professional and accessible - even though he once sued the firm in an attempt to cajole a lender into negotiating. Potash eventually dismissed Harmon Law from the suit.
“It is probably the best of the bunch to deal with,’’ he said of Harmon Law.
But other attorneys, including Sherrill Gould, based in Littleton, said Harmon’s attorneys can be overly aggressive. Gould said some of her clients’ homes have been auctioned by Harmon Law even as they were talking to lenders about loan modifications.
“It is like a factory with no names, no faces, and nobody to reach,’’ she said.
Harmon disputes Gould’s portrayal, saying that his staff treats homeowners with respect and that his employees are always available by phone during regular business hours.
“Do we ever make a mistake? Of course we make a mistake.’’ he said. “But not a lot of mistakes. And if we do, they are inadvertent.’’
When Harmon opened his business about two decades ago, home foreclosures were relatively uncommon, so few law firms represented banks in the property-taking process. But Harmon saw a niche to mine and began courting lenders seeking to evict delinquent homeowners. As the number of home-takings increased, Harmon Law expanded into New Hampshire and Rhode Island. In 1995, Harmon opened an auction company, Commonwealth Auction Associates Inc., followed in 2002 by a title company, Northeast Abstract Co.
The firm now has about 85 attorneys and an undisclosed number of additional support staff. The over 15,600 auction notices it scheduled since the beginning of 2010 were more than twice the number submitted by the next largest firm, Orlans Moran PLLC, according to Warren Group, a Boston company that tracks local real estate. In Boston, Harmon Law foreclosed on about 350 homeowners in 2010, according to Suffolk County Registry of Deeds records.
Nobody claims Harmon Law is breaking the law by feeding business to its family of subsidiaries. Some real estate specialists see it as smart business. But others familiar with how Harmon Law works say its interlocking companies create incentives to keep foreclosures rolling forward, even when there are reasons to slow the process.
“It is a massive conflict of interest and there’s a lot of money here,’’ said Bruce Boguslav, executive director of a Worcester-based nonprofit housing counseling company, HSI Trust Home Savers. “They get paid every step of the way.’’
Kathleen Engel, a Suffolk University Law School professor, said the arrangement raises questions about whether homeowners are being overcharged since Harmon’s law office, title company, and auction outfit are part of the same operation. Title search fees usually range between $100 and $300. Auctions typically cost about $550, but the price can be significantly higher depending on the case, real estate specialists said.
“There is a question about inflating costs,’’ Engel said of the Harmon setup. “When you have these interconnected companies that can benefit from the interconnectedness, you run the risk that nobody is engaging in adequate due diligence.’’
Harmon said his law firm is ultimately on the hook for all work involved in completing a foreclosure, so it makes sense for him to be able oversee key steps along the way.
Harmon Law also draws complaints because of its relationship with the Mortgage Electronic Registration Systems Inc., or MERS, a Virginia company created and owned by US lenders to oversee a database of about 32 million active mortgages.
Mark Harmon and several of his top attorneys are named as MERS vice presidents, a title that gives them authority to transfer mortgages from one lender to another. They are among thousands of employees of banks and law firms across the country with the same power, although none of them are paid employees of the mortgage database company.
MERS is a defendant in Mack’s lawsuit and other foreclosure cases nationwide that question the organization’s authority to transfer mortgages and foreclose on homes. MERS was launched in 1995 as a way to reduce lenders’ expenses at a time when an increasing number of mortgages were being packaged into securities and sold to investors. By positioning itself as the official owner of all mortgages in its system, MERS maintains there is no need to record every loan transfer between investors, resulting in a huge cost savings for lenders.
Harmon’s attorneys use their MERS standing to transfer mortgages to a lender when an official record is needed at a county registry of deeds to complete a property seizure. Late last year, a local land court judge ruled in favor of Harmon Law in two cases in which homeowners challenged the practice.
But some legal specialists say Harmon Law’s role in moving mortgages around poses ethical problems. For instance, they say, the firm’s attorneys purport to represent the lender transferring a mortgage as well as the lender receiving it. They question how Harmon’s attorneys can call themselves vice presidents of a company that doesn’t pay them salaries.
“It turns corporate law on its head that a corporation can have that many vice presidents,’’ said John Rao, an attorney for the National Consumer Law Center, based in Boston.
Coakley, too, said in court documents that she finds it “troubling’’ for Harmon employees to represent MERS while transferring mortgages to lender clients.
Even some local attorneys say they shy away from transferring mortgage documents as executives of MERS because of potential conflicts of interest, no matter whether they had legal authority to do so. Two other area law firms have authority to represent MERS in loan transfers - Orlans Moran with offices in Boston and Ablitt/Scofield Law Offices in Woburn - according to MERS. Julie Moran, head of the Boston office of Orlans Moran, which is headquartered in Michigan, declined to comment on the practice. Lawrence Scofield, a partner with Ablitt/Scofield, said the firm does not take advantage of its MERS authority.
“We never sign’’ loan transfers as representatives of MERS, Scofield said. “We don’t want to have any conflict there.’’
Harmon Law critics question whether Andrew Harmon, a company director, signs all the MERS mortgage documents himself, raising the issue of forgery and robosigning - a practice that came to light last year after employees of some US banks admitted they did not review all foreclosure documents before signing paperwork.
John L. O’ Brien, head of the Southern Essex District Registry of Deeds in Salem, said he found five different versions of Andrew Harmon’s signature on foreclosure-related legal documents as part of an investigation into alleged robosigners - information he submitted to Coakley’s office.
“A law firm should not be filing documents that contain various signatures from the same lawyer,’’ said O’Brien. “You just don’t take someone’s home with what I consider to be fraudulent documents.’’
Andrew Harmon, in an e-mail to the Globe, dismissed the notion that some of his signatures have been faked as “utterly false.’’
Concerns over foreclosure practices in general have affected foreclosure law firms this year in Massachusetts and across the country. Business has dropped off significantly statewide as lenders have cut back on property seizures, in part to clean up their own practices and reduce the risk of court cases. Foreclosure deeds statewide dropped nearly 58 percent in the first five months of the year, compared with the same period in 2010, according to the latest data from Warren Group.
But most economists consider it a lull, not a waning of the crisis.
And for those already tangled in the process, the crisis continues unabated.
One of those homeowners, Edwin Mejia, sued Harmon Law and CitiMortgage earlier this year after the lender took his four-bedroom Colonial in Methuen days before he was scheduled to sell it at a profit. Mejia, 38, said Harmon Law cut him out of the deal by selling the property at auction for $30,000 lower than the price he had agreed on - with the same buyers. Mejia lost the house, any equity he had in it, and says he is now saddled with the stigma of a foreclosure that should have been avoided.
Sabah Akar’s dispute with Harmon Law has dragged on for two years. She filed suit in 2009, claiming Harmon Law knew she was in the middle of a loan modification process when it came after her three-bedroom ranch home in Stoughton.
Akar’s attorney, Peter Clark, said she could have afforded a lower loan payment but wasn’t given time to work out a deal. Akar remains in her home as the case crawls forward in US District Court.
“Even if they are zealously looking out for their lender clients, they still have an obligation to treat borrowers fairly,’’ Clark said of Harmon Law. “They haven’t done that.’’
Jenifer B. McKim can be reached at email@example.com. Beth Healy of the Globe staff contributed to this report.