Christmas comes a few years late for many former Colorado homeowners. Caren Castle, one of Colorado’s leading foreclosure lawyers will be spending her holidays in court during a three-week trial to determine whether she colluded to gouge homeowners, lenders, and taxpayers.
For years the Castle Law Group – and its various incarnations – dominated the foreclosure business in Colorado. So much so that Castle’s husband, Larry Castle became a key influence on legislators drafting bills to govern the process. By 2008, when the economic downturn began, the Castle Law Group had positioned at forefront of the foreclosure wave about to hit. The law firm would bill millions of dollars in fees for foreclosures over the coming years, most of which would be passed on to homeowners attempting to save their house.
I’ve actually known several attorneys who worked for Caren Castle and have been to their offices. When I visited, the offices were high up in one of Denver’s skyscrapers, only about a block away from the bankruptcy courts. When you got off the elevator, you went into an office with a waiting room locked off from the attorneys and with thick, plated glass between visitors and the receptionist. It’s hard to tell whether the physical separation was meant to simply keep angry homeowners at bay or protect the people inside who were taking their homes.
Also striking were the number of non-attorney staff compared to attorneys. As memory serves, there were only about 20-30 attorneys, but more than one hundred staff. Of course, a foreclosure practice is necessarily quantity driven. Because the firms agree to flat fees with lenders, around $875 per case for the Castle Law Group, having fewer high-priced attorneys and more data-processing staff makes sense. But the sheer volume suggested that staff must have produced a caseload that must have been mind-boggling.
In fact, picking up a friend for dinner one night and watching as she worked through a few more cases files. She would literally flip open a case folder, glance at a couple items, sign, and pick up the next one. At the time, I remember thinking that it must just be a simple verification. And it likely was.
But that is one of the central questions in Castle’s trial. Unlike any other state in the country, and based primarily on her husband’s lobbying efforts, Colorado always foreclosure based on an attorney’s signed affirmation that the lender owns the right to foreclose. No additional proof is required. Given that mortgages may be bundled, bought, and sold many time over during the course of their life, that presents a serious problem. In fact, the foreclosing lender might not have any right to foreclose.
And that is just one of the issues the Colorado Attorney General is pursuing. There are also issues over unapproved fees charged by the law firm and collusion to fix prices with their biggest competitors. The case seems almost bigger than Caren Castle, but a trial of the system itself. In fact, her own defense attorney has attempted to shift the blame to banks and lenders pressuring other players into these positions. And he may well have a point. While Castle made millions of dollars, it is no secret that it is a barely a drop in the ocean of money made by lenders. Practices such as sub-prime lending created the very need for fast, cheap foreclosures.
While most people will spend the holidays with family and friends, hopefully in a new home bought after the economy began to rebound, there will be many hoping their present comes a little later in the form of a verdict against Caren Castle.
This column appeared in the print edition of The Colorado Statesman.