State investigators digging into Colorado attorneys who controlled the bulk of the business during the foreclosure crisis are taking a closer look at a title insurance company with ties to those law firms.
In a Denver District Court filing, the Colorado Attorney General’s Office said a company with connections to former foreclosure powerhouse Lawrence Castle “might be improperly charging an additional $175 for title commitments” it never actually issued to consumers.
In a related development, Castle said in a separate court filing for the same case that he’s considering suing state investigators for allegedly causing federal mortgage agencies to dump his law firm from handling its cases, effectively forcing the state’s biggest foreclosure processor to close shop.
The filings are part of the state’s investigation into Castle and a number of affiliated companies that dominated the state’s foreclosure business for years, reaping millions of dollars by allegedly overcharging for a variety of services it monopolized. The state filed a civil complaint last year and is seeking millions of dollars in fines and penalties.
One of the related services came from Colorado American Title, a company Castle’s various law firms used on foreclosure cases not tied to Fannie Mae, the federal mortgage insurer.
Castle’s law firm used Colorado American to perform title commitments on properties that did not have federally insured mortgages.
Efforts to reach Castle for comment were unsuccessful.
Disclosure of the state’s latest line of inquiry appeared in its challenge of a request by Colorado American Title’s attorney to withdraw from the case, citing irreconcilable differences with his client, court records show.
Investigators say they want additional documents from the lawyer to determine whether Colorado American charged for undelivered title policies, according to the filing.
Colorado American is owned by Castle’s longtime personal and business accountant, Ryan O’Connell, court records show. O’Connell also owns RE Records Research in Morrison, which Castle used for title commitments on Fannie Mae and Freddie Mac properties he was foreclosing.
It was O’Connell whom AG investigators said called the title business “the cash cow” of the foreclosure industry, where attorneys had the chance to reap windfall profits, court records show.
Castle has fought the AG investigation into his law firm’s foreclosure practices since it surfaced in court hearings regarding state efforts to acquire documents and other information about the lawyers and their clients.
That battle continues as Castle points toward investigator tactics as the reason for some of his business troubles.
Castle said his side had “information that the state may have applied undue pressure on servicers and investors — including Fannie Mae and Freddie Mac — to stop hiring the Castle Law Group to conduct foreclosures in Colorado and other states.”
The loss of that business “was the proximate cause of the Castle defendants’ firms going out of business, with hundreds of employees losing their jobs,” according to the filing.
“Because we are in active litigation with Mr. Castle, we cannot discuss this matter outside of the court process,” AG spokeswoman Carolyn Tyler said Monday.
The case is slated for a two-week trial in January 2016 in Denver District Court.
In a separate matter, Wells Fargo Financial Leasing recently landed a $684,000 judgment agreement with Castle over unpaid leases on a dozen high-end copy machines and data collection systems the law firm and an affiliated business had rented. Wells Fargo had sued in Denver District Court.
David Migoya: 303-954-1506, dmigoya@denverpost.com or twitter.com/davidmigoya
