Matt Weidner – Fighting For The American People

Posts Tagged ‘P.A’

Hat tip to Nye Lavalle….not just for this article….but for first reporting the abuses of foreclosure mills as far back as 2003.  The truly staggering issues presented by these revelations are just why no one did anything about this.  Even more mind blowing by far is the fact that none of the parties who are responsible for this have ever been held accountable.  Not even today.

Not even today, an astonishing eight years after problems were first reported and a full year after the full blown crisis erupted and nothing, not a single thing has happened to these wrongdoers.  Not the Florida Bar, not the Florida Attorney General, not the FBI or the feds.  No one. Nothing.

The report itself is so mind blowing because it details so many abuses then admits that even today….nothing. No punishment, no immediate shutdowns or supervisory efforts.  And what about the hundreds of thousands of homeowners who suffered under these abuses?  And what about the hundreds of thousands who continue to suffer even today?  Where is the justice for them? When they examine their experience with “our” court system will they believe they have been treated fairly?  Will they believe the scales of justice are balanced fairly?  Of course they won’t and with good reason.  Just pile this report on to the stack (actually it’s more like a warehouse now) of other reports and evidence of the abuses Americans have suffered at the hands of the 1% and their minions who operate all across this country.  And for those struggling to understand what the people in Occupy Wall Street (and Tampa and Miami and Chicago and Seattle) are protesting against, I will suggest to you that they are protesting because of the information that is printed in this report.  One of the fundamental issues being protested is the fact that there is no accountability.  As detailed in this report, the banks and their law firms have been permitted to abuse homeowners….and desecrate our legal system…with impunity for years. And nothing has been done about it.  Even today.

From the Report:

In December of 2003, a Fannie Mae shareholder began alerting Fannie Mae to foreclosure abuse allegations, and in 2005 Fannie Mae hired an outside law firm to investigate a variety of allegations regarding purported foreclosure processing abuses. In May 2006, the law firm issued a report of investigation in which it found that:

[F]oreclosure attorneys in Florida are routinely filing false pleadings and affidavits…. The practice could be occurring elsewhere. It is axiomatic that the practice is improper and should be stopped. Fannie Mae has not authorized this unlawful conduct. Further, the report observed that Fannie Mae did not take steps to ensure the quality of its foreclosure attorneys’ conduct, the legal positions taken in the attorneys’ pleadings, or the manner in which the attorneys processed foreclosures on the Enterprise’s behalf.

Also From the Final Report:

For example, when Fannie Mae terminated the Stern Law Firm, it estimated it would incur approximately $5.5 million in total costs. The costs include $4.6 million in file transfer fees (this estimate represents $200 per transfer for approximately 23,000 loan files). Fannie Mae estimated all other associated costs at approximately $900,000.

There were indicators prior to August 2010 that could have led FHFA to identify the heightened risk posed by foreclosure processing within Fannie Mae’s RAN. These indicators included significant increases in foreclosures, which accompanied the deterioration of the housing market; consumer complaints alleging improper foreclosures; contemporaneous media reports about foreclosure abuses by Fannie Mae’s law firms; and public court filings in Florida and elsewhere highlighting such abuses. Although FHFA’s management has yet to publish the results of its special review of Fannie Mae’s RAN, the examiners’ preliminary findings confirm that at least one of these indicators – deteriorating industry conditions – should have provided adequate warning of the increased risk associated with default-related legal services.

FHFA has not developed formal policies to address poor performance by law firms that have relationships – either directly through contract or through its loan servicers – with both of the Enterprises. FHFA-OIG identified instances where Freddie Mac terminated for poor performance law firms that processed foreclosures on its behalf, but Fannie Mae continued to use the firms. FHFA did not specifically review such terminations and, therefore, lacks assurance that law firms with histories of performance deficiencies do not jeopardize the safety and soundness of the Enterprises.

Federal and state regulators and law enforcement officials subsequently initiated probes into whether banks and foreclosure law firms improperly seized homes using fraudulent or incomplete paperwork. For example, in August 2010, the Florida Attorney General announced that his office had launched investigations into allegations of unfair and deceptive foreclosure practices involving three Florida law firms. The three law firms were part of Fannie Mae’s RAN and included the Law Offices of David J. Stern, P.A. (the Stern Law Firm).

And now the New York Times Article:

Fannie Mae, the mortgage finance giant, learned as early as 2003 of extensive foreclosure abuses among the law firms it had hired to remove troubled borrowers from their homes. But the company did little to correct the firms’ practices, according to a report issued Tuesday.

Only after news reports in mid-2010 began to describe the dubious practices, like the routine filing of false pleadings in bankruptcy courts, did Fannie Mae’s overseer start to scrutinize the conduct. The report was critical of that overseer, the Federal Housing Finance Agency, and was prepared by the agency’s inspector general.

In one notable lapse, even after the agency reported problems to Fannie Mae in late 2010 about some of the approved law firms, it did not request a response from the company, the report said.

“American homeowners have been struggling with the effects of the housing finance crisis for several years, and they shouldn’t have to worry whether they will be victims of foreclosure abuse,” said Steve Linick, inspector general of the finance agency. “Increased oversight by F.H.F.A. could help to prevent these abuses.” New York Times

FHFAAUDIT

Profits at this state’s most notorious foreclosure mill were announced yesterday.  The thing that I still cannot understand is why our local, elected circuit court judges allow so much shotty practice of law to occur from this mill and others, while the mills are allowed to announce million dollar profits…oh and another question about how what is essentially a law practice can be permitted to be publicly traded.  The whole problem with this is the rules and ethical obligations of lawyers are inconsistent with a publicly traded company.

When will all this stop?  Make sure to tune into the earnings conference call at 8:30 (Perhaps every judge in the state should tune in for this call.)

Management will conduct a conference call at 8:30 a.m. Eastern Time on Wednesday, September 8, 2010, to discuss the second quarter and year-to-date 2010 results. To participate in the live conference call, please dial the following number five to ten minutes prior to the scheduled conference call time: 877-312-5504. When prompted by the operator, mention conference ID 94593027.

PLANTATION, Fla., Sept. 7, 2010 (GLOBE NEWSWIRE) — DJSP Enterprises, Inc. (Nasdaq:DJSP – News) (Nasdaq:DJSPW – News) (Nasdaq:DJSPU – News), one of the largest providers of processing services for the mortgage and real estate industries in the United States, today announced financial results for the three and six month periods ended June 30, 2010.

Second Quarter Financial Highlights

• Total revenue for the second quarter 2010 decreased 9.1% to $56.1 million from $61.7 million in last year’s comparable period.
• Excluding client costs, total revenue for the second quarter 2010 decreased to $28.9 million from $30.9 million or 6.5% compared to the same period last year.
• Adjusted Net Income including noncontrolling interests was $5.5 million for the second quarter 2010 or $0.28 per diluted share.*
• Adjusted EBITDA for the second quarter 2010 was $6.7 million.

Year to Date Financial Highlights

• Total revenue for the six months ended June 30, 2010 increased 9.3% to $127.7 million from $116.8 million in last year’s comparable period.
• Excluding client costs, total revenue for the six months ended June 30, 2010 decreased to $59.7 million from $61.0 million or 2.1% compared to the same period last year.
• Adjusted Net Income including noncontrolling interests was $14.2 million for the six months ended June 30, 2010 or $0.73 per diluted share.*
• Adjusted EBITDA for the six months ended June 30, 2010 was $21.1 million.

*Calculated using treasury stock method assuming an average ordinary share price of $8.25 for the quarter ended June 30, 2010; assuming 19.5 million average diluted shares outstanding.

Second Quarter Results

Total revenue for second quarter 2010 decreased 9.1% to $56.1 million from $61.7 million in the same period last year. This was primarily due to a decrease in foreclosure referrals, title fees, and client reimbursed costs. Title fees decreased due to the decrease in foreclosure volume and the switch made by some clients to use their own title company. These decreases in revenue were partially offset by increases in REO closings, REO liquidation operations at Default Servicing, and eviction fees. Two new service offerings, Deed-in-lieu and Mediations, also contributed to offsetting these decreases. During the second quarter, client reimbursed costs decreased by 11.7% to $27.2 million from $30.8 million in the same quarter in 2009 as a result of a decrease in foreclosure volume. Our REO closing business became an increasingly significant source of revenue during the quarter, generating $3.5 million in revenue compared to $2.1 million in the same period last year. Our REO liquidation business, which emanates from a single customer, contributed $3.2 million in revenue in the second quarter compared to $2.9 million in the same quarter last year. Going forward, we intend to offer both REO closing and liquidation services to additional customers as a means of increasing revenues and profits. Deed-in-lieu and Mediation services were initiated in the second quarter and contributed a combined $0.7 million to our revenues during the quarter. Revenue from foreclosure services decreased by $1.5 million, or 8.3%, for the quarter to $16.6 million, compared to $18.1 million during the same period last year.

Our adjusted EBITDA decreased to $6.7 million for the three months ended June 30, 2010 from $17.7 million in the same period last year. This decrease was primarily due to three factors: the decrease in foreclosure volume; an increase in compensation expenses; and an increase in expenses related to becoming a public company, including $0.9 million in legal expenses. Our compensation expenses increased $2.6 million, on an adjusted basis, primarily as a result of staffing increases. Increases in staffing were made to address expressed client needs, expanding legacy files due to court delays, and necessary upgrades to the corporate management structure. A much smaller increment of the increase in staffing was due to the mandatory mediation requirement dictated by the Florida Supreme Court for foreclosure files.

During the second quarter 2010, our adjusted net income decreased to $3.5 million from $8.3 million in for the same period in 2009, due to the decrease in revenue and increase in our expenses stated above.

Year-to-Date Results

Total revenue for the six months ended June 30, 2010 increased $10.9 million, or 9.3%, to $127.7 million from $116.8 million in last year’s comparable period. The revenue resulted from an increase in client reimbursed costs, REO closings, REO liquidations, eviction services, and two new services, Deed-in-lieu and Mediation. These increases were offset by decreases in our foreclosure and title services fees. Excluding client reimbursed costs, our total revenues decreased by $1.3 million, or 2.1%, to $59.7 million compared to $61.0 million for the same period last year. Revenues from our REO closing and liquidation business increased by $2.4 million and $1.6 million, respectively, over the same period last year. As mentioned above we initiated two new services, Deed-in-lieu and Mediations, which contributed a combined $0.7 million to total revenue.

Compensation expenses, on an adjusted basis, increased by $5.9 million, or 30.7%, to $25.1 million for the six months in 2010 compared to $19.2 million during the same period in 2009.

General and administrative expenses, on an adjusted basis, increased by $5.1 million, or 60.7%, to $13.5 million from $8.4 million last year. Public company and nonrecurring expenses increased our expenses by approximately $2.5 million during the first six months of 2010. Other operating expenses, including rent, supplies, travel, mailing, and others, increased as a result of the increase in headcount.

During the first six months of 2010, our adjusted net income decreased to $7.8 million from $15.8 million in the same period in 2009.

We generated $17.1 million in cash from operating activities in the six months ended June 30, 2010, compared to $26.4 million in the six months ended June 30, 2009.

Our overall debt of $74.6 million bears an average interest rate of 2.9%. The senior note of $35 million bears no interest for the first six months.

Operating Discussion

As a result of management’s discussions with our largest client, The Law Offices of David J. Stern, P.A. (“DJSPA“) and with the major lenders and servicers for whom DJSPA processes foreclosure files, we believed file volume would increase in the third quarter and we previously decided to maintain current staffing levels. However, file volumes continue to be delayed and existing staffing levels are not sustainable indefinitely.

Rick Powers, President and COO commented, “While a large portion of our business can only be processed with human capital, we are identifying opportunities where technology and process change can be implemented to create efficiency. We are prepared to create efficiencies and make cuts where appropriate over the next three to six months.”

DJSP Enterprises continues to diversify our service offerings beyond default services. As part of our effort to grow our business, we are building business to address the new government initiatives. In this regard, we have expanded our national Deed-in-lieu and modification services. Our Deed-in-lieu business has been our fastest growing service offering in the third quarter. In addition, with the addition of Timios we are moving to expand our title services, which among other things, provides title work for refinancing, into the nation’s largest and hardest hit real estate market of California.

Timios, Inc.

As of August 1^st, all Florida title operations have been consolidated under the common management of Timios, Inc. and have already adopted Timios’ best in class paperless operating system for all new orders. In addition we are in the process of licensing Timios in California, the nation’s largest real estate market. This is a major step in becoming a cyclical provider of services to the mortgage industry.

Rick Power added, “That we were able to accomplish this consolidation in such a short period of time speaks to the strong technology at Timios and the quality of both management teams. We are looking forward to entering the California market and expect continued strong performance from Timios.”

Management

David J. Stern Chairman and CEO stated, “We are happy to announce that Kerry Propper will be taking Matthew Kayton’s seat on the board of directors. Mr. Kayton will transition roles with the company and will continue to work with us on a consulting basis in the areas of Title services, acquisitions and other strategic initiatives.”

Mr. Stern continued, “I am very thankful to Matthew for his service and I look forward to his continued contribution as a consultant. Kerry brings a great deal of public company experience to the board and I am pleased that he will be joining us.”

Conference call Information:

Management will conduct a conference call at 8:30 a.m. Eastern Time on Wednesday, September 8, 2010, to discuss the second quarter and year-to-date 2010 results. To participate in the live conference call, please dial the following number five to ten minutes prior to the scheduled conference call time: 877-312-5504. When prompted by the operator, mention conference ID 94593027. Participating in the call for DJSP will be David J. Stern, Chairman and Chief Executive Officer, Rick Powers, President and Chief Operating Officer, and Kumar Gursahaney, Executive Vice President and Chief Financial Officer.

If you are unable to participate in the call at this time, a replay will be available for one week starting on Wednesday, September 8, 2010, at 11:30 Eastern Time. To access the replay, dial 706-645-9291. Please use passcode 94593027. The call will also be carried live by webcast over the Internet and accessible at www.djspenterprises.com.

About DJSP Enterprises, Inc.

DJSP is the largest provider of processing services for the mortgage and real estate industries in Florida and one of the largest in the United States. We provide a wide range of processing services in connection with mortgages, mortgage defaults, title searches and abstracts, REO (bank-owned) properties, loan modifications, title insurance, loss mitigation, bankruptcy, related litigation and other services. Our principal customer is DJSPA, whose clients include all of the top 10 and 17 of the top 20 mortgage servicers in the United States, many of which have been DJSPA clients for more than 10 years. We have approximately 1,200 employees and contractors and are headquartered in Plantation, Florida, with additional operations in Louisville, Kentucky and San Juan, Puerto Rico. Our U.S. operations are supported by a scalable, low-cost back office operation in Manila, the Philippines that provides data entry and document preparation support for our U.S. operations.

Forward Looking Statements

This press release contains forward-looking statements about us within the meaning of the Private Securities Litigation Reform Act of 1995 (the “Act”), including but not limited to management’s expectations about efficiencies and expense reduction efforts. Mr. Kayton’s ongoing consulting role with us, our strategic growth initiatives and our ability to provide closing services in California. Additionally, words such as “anticipate,” “believe,” “estimate,” “expect” and “intend” and other similar expressions are forward-looking statements within the meaning of the Act. Such forward-looking statements are based upon the current beliefs and expectations of our management and are subject to risks and uncertainties, which could cause actual results to differ from the forward looking statements. The following factors, among others, could cause actual results to differ from those set forth in the forward-looking statements: business conditions, changing interpretations of generally accepted accounting principles; outcomes of government or other regulatory reviews, particularly those relating to the regulation of the practice of law; the impact of inquiries, investigations, litigation or other legal proceedings involving us or our affiliates, which, because of the nature of our business, have happened in the past to us and the DJSPA; the impact and cost of continued compliance with government or state bar regulations or requirements; legislation or other changes in the regulatory environment, particularly those impacting the mortgage default industry; unexpected changes adversely affecting the businesses in which we are engaged; fluctuations in customer demand; our ability to manage growth and integrate acquisitions; intensity of competition from other providers in the industry; general economic conditions, including improvements in the economic environment that slows or reverses the growth in the number of mortgage defaults, particularly in the State of Florida; the ability to efficiently expand our operations to other states or to provide services we do not currently provide; the impact and cost of complying with applicable U.S. Securities and Exchange Commission (“SEC”) rules and regulations; geopolitical events and changes, as well as other relevant risks detailed in our filings with the SEC, including our Annual Report on Form 20-F for the period ended December 31, 2009, which are available at the SEC’s internet site (http://www.sec.gov). Forward-looking statements in this press release speak only as of the date of the press release, and we assume no obligation to update forward-looking statements or the reasons why actual results could differ.

Non-GAAP Financial Measures

The financial information and data contained in this press release are unaudited and do not conform to the SEC’s Regulation S-X. This press release includes certain estimated financial information and forecasts presented that are not derived in accordance with accounting principles generally accepted in the United States (“GAAP”), and which may be deemed to be non-GAAP financial measures within the meaning of Regulation G promulgated by the SEC. Management believes that the presentation of these non-GAAP financial measures serves to enhance the understanding of the Company’s financial performance. Such measures are not recognized terms under GAAP, and should be considered in addition to, and not as substitutes for, or superior to, operating income, cash flows, revenues, or other measures of financial performance prepared in accordance with GAAP. Such measures are not a completely representative measure of either the historical performance or, necessarily, the future potential of the Company.

The adjusted EBITDA measure presented consists of income (loss) from continuing operations before (a) interest expense; (b) income tax expense; (c) depreciation and amortization; and (d) income and/or expense items that are expected to be at different levels in future periods. We are providing adjusted EBITDA, a non-GAAP financial measure, along with GAAP measures, as a measure of profitability because adjusted EBITDA helps us to evaluate and compare our performance on a consistent basis with the operating cost structure in place as a publicly traded operating company, reflecting the effects of that cost structure and our current fee schedule. In the calculation of adjusted EBITDA for the three and six months ended June 30, 2009, we exclude from expenses the compensation paid to Mr. Stern that exceeded the base compensation that he was entitled to receive after we became a publicly traded operating company (and prior to September 1, 2010), because the Company no longer has any arrangement with Mr. Stern that would require any payments to him at a comparable level. Mr. Stern does not have an incentive plan arrangement providing for pay above base compensation. In addition, we excluded the payroll taxes associated with such compensation, as well as travel expenses incurred on behalf of Mr. Stern in prior periods that are no longer provided since we became a publicly traded operating company. The adjustment to Fee to Processing reflects the additional fees DJS Processing, LLC would have received under the Services Agreement if the fee schedule under the Services Agreement had been determined in a fashion consistent with the current fee schedule. In the calculation of adjusted EBITDA for the three and six months ended June 30, 2010, we included additional fees due to DJS Processing, LLC as a result of a retroactive amendment to the fee schedule for the Services Agreement agreed to by DJS Processing, LLC and DJSPA to increase the fees payable to DJS Processing, LLC effective January 1, 2010.

In the calculation of the adjusted net income measure presented for the three and six months ended June 30, 2010, we deducted the actual GAAP interest, depreciation and amortization for the period from the adjusted EBITDA calculation and then subtracted assumed income tax expense, calculated at the expected going forward tax rate of 38.6% on pre-tax income after minority interest. For periods prior to our becoming a publicly traded operating company, we were not subject to income tax and therefore did not record income tax expense. We are providing adjusted net income, a non-GAAP financial measure, along with GAAP measures, as a measure of profitability because adjusted net income helps us to evaluate and compare our past performance on a consistent basis with the taxable structure in place after our becoming a publicly traded operating company, reflecting the effects of that taxable structure on profitability. In the calculation of adjusted net income measure presented for the three and six months ended June 30, 2010, we deducted the actual GAAP interest, depreciation, amortization and income taxes for the period from the adjusted EBITDA calculation. The following table provides reconciliations of net income (GAAP) to Adjusted EBITDA (Non-GAAP) and adjusted net income (Non-GAAP).