Foreclosure firm's revenues jump to $260 million

The housing crisis has been very good for Florida's biggest processor of foreclosure lawsuits: Its revenues have skyrocketed to $260 million since the housing bust began.

In recent years, the Law Offices of David J. Stern, a Broward County-based foreclosure law firm, has become the largest filer of foreclosure suits in Florida. It also is the biggest filer in Hillsborough County, according to local court records.

Stern has taken an unusual step by separating his firm's lawyers from its back-office clerks, title insurance workers and other non-legal staff. Stern spun this back-office staff into a publicly traded company called DJSP Enterprises, which must file financial reports with the Securities and Exchange Commission.

While it's separate from Stern's law practice, Stern is still chairman and chief executive officer of DJSP Enterprises, and Stern's law practice relies on DJSP for everything that doesn't require a lawyer's hand.

This spin-off provides a glimpse into Stern's foreclosure empire.

According to DJSP Enterprises' recent annual financial report, the back-office operation had profits of about $44.6 million in 2009 on revenues of $260.3 million. That means the company's revenues have multiplied by a factor of six as the foreclosure crisis got worse.

In 2006, for example, the company reported profits of $8.6 million on revenues of $40.4 million, the company's report says.

The SEC report does not include financial information for Stern's separate law practice, which is not publicly traded and does not report its financial information.

DJSP's chief financial officer, Kumar Gursahaney, confirmed the revenue and profit figures in the company's SEC report. Stern could not be reached for comment.

In its financial report, DJSP says the booming number of foreclosures in Florida fueled its growth. So, too, did the huge backlog of homes that banks have taken back from delinquent homeowners. DJSP Enterprises helps lenders dispose of these homes.

Today, it processes more than 5,800 foreclosure files per month and more than 70,000 per year, its SEC filing says. As of Dec. 31, the company had 950 employees and offices in Plantation and Louisville, Ky. Also, DJSP uses outsourced workers in Manila, the Philippines.

DJSP's stock trades for $12.05 per share on the Nasdaq-GM exchange.

Still, even with its boom, companies such as DJSP and its chief customer, the Law Offices of David J. Stern, are getting more attention from judges lately.

Dubbed "foreclosure mills," these firms are known for a factory-like process where most of the legwork of filing lawsuits, researching titles and other duties are handled by clerks and paralegals rather than lawyers.

Some judges around Florida have criticized foreclosure mills for sloppy legal work and cutting corners.

Last week, The Wall Street Journal wrote about Lynn Tepper, a circuit court judge in Pasco County who accused the Law Offices of David J. Stern and a banking client of submitting a fraudulent document.

According to the article, the judge found Stern's office presented a mortgage document with a falsified notary stamp. In an interview with The Tampa Tribune Monday, Tepper said it appeared the document had been backdated in order to give a bank legal standing to foreclose on a home.

Forrest McSurdy, the in-house legal counsel for Stern's law practice, told the Tribune it was not intentional.

"Really it was a mistake by the notary and it was something that was not caught at the time of the hearing," McSurdy said.

Tepper believes otherwise.

"This isn't a clerical error," the judge said. "It wasn't a mistake. A notary isn't supposed to notarize that someone swore an instrument in front of them if, in fact, they didn't sign it in front of them."