Inside Foreclosure King David Stern’s Downfall

A caricature of David J. Stern, portrayed as Superman, from a t-shirt he gave to investors.

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After years of high-flying success and millions of dollars in profits, the future suddenly looks grim for the Law Offices of David J. Stern. The firm, which was the subject of a long MoJo investigation published in August, used to be one of the nation’s most powerful “foreclosure mills,” those assembly line-like operations that handle hundreds of thousands of foreclosure cases for the nation’s largest mortgage companies. (In 2009 alone, the Stern firm handled 70,382 foreclosure cases.) But in the past few months, the corner-cutting and alleged fraud in the foreclosure business, as described in my August story, erupted into a national scandal. As a result, the Stern firm has seen its fortunes plummet, with major clients, like Fannie Mae, Freddie Mac, and Citigroup, cutting ties to Stern. Stern’s operation has also laid off hundreds of employees in recent weeks.

Until now, though, the full extent of the decline of Stern’s operation—which includes his law firm and publicly-traded real estate processing company, DJSP Enterprises—has been somewhat unclear. But according to a pair of letters obtained by Mother Jones, Stern says he plans to shed about 70 percent of his workforce. Last winter, his operation employed nearly 1,000 employees, which means 650 to 700 staffers in all could face termination. (An official with DJSP Enterprises didn’t immediately respond to a request for comment on Thursday.) Even more staggering is this statistic: In the last six months, Stern writes in one of the internal letters, his outfit has lost more than 90 percent of new business referrals. “While we are doing everything possible to guide the company successfully through these difficult times, these developments mandate that we take immediate action to align the business with current realities,” reads one of the letters, with Stern’s name listed as author. The letters, a source close to DJSP Enterprises says, were sent on Thursday to employees throughout the company; one is a termination letter, the other a letter informing recipients that they remained employed by DJSP.

Here are the two letters in their entirety:

DJS Termination Letter

 

DJS Still Employed Letter

 

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Readers also told us to just give it to you straight when we need to ask for your support, and seeing how matter-of-factly explaining our inner workings, our challenges and finances, can bring more of you in has been a real silver lining. So our online membership lead, Brian, lays it all out for you in his personal, insider account (that literally puts his skin in the game!) of how urgent things are right now.

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