A recent Denver Post story, “Colorado Foreclosure Lawyers Target of Probe into Billing Practices,” reports that the Colorado attorney general is investigating whether law firms specializing in foreclosures regularly inflate expenses that homeowners must reimburse.  Lawyers handling foreclosures can be reimbursed for certain expenses, such as running public notices in newspapers advising homeowners of their rights.  Investigators say that sometimes lawyers inflated these expenses by as much as 10 times.

In two cases, the law firms hired companies, known as process servers, owned by family and friends, investigators say.  The expenses are allowed by law but are limited to the amount a lawyer actually paid or was billed for services or expense such as mailing costs, property inspections, title searches and court docketing charges.  The charges are tacked on to the overall cost of a foreclosure and the unpaid mortgage amount, then paid by the homeowner facing foreclosure, the foreclosing bank or investors who buy the property at public auction.

In the worst-case scenario, the amount law firms overcharged taxpayers and homeowners statewide in the past decade would reach into the tens of millions of dollars.  The lawsuits seek a judge’s order forcing the lawyers to comply with investigative subpoenas.  In one case, a Colorado judge ordered a high-volume foreclosure lawyer to turn over documents to state investigators for review.  The newspaper also reported interest from “a handful of foreclosure lawyers listening intently from the back of the courtroom.”