Cornering the state's market for foreclosures

Call it a foreclosure factory. But the assembly line consists of paper and computers, not pieces and parts.

More than one in four mortgage foreclosures in Minnesota begins its journey from an unassuming suite in a two-story office building in Woodbury.

Behind the plain pane-glass door of the law firm of Wilford & Geske, about 5,300 mortgages a year -- an average of more than 20 each workday -- are processed and placed on the path to a sheriff's sale or, less likely, a successful workout between the lender and the mortgage holder.

Wilford & Geske is a small law firm but a huge player in the state's $10 million to $13 million mortgage foreclosure industry. With 26 percent of the Minnesota foreclosure market, the Wilford firm processes more cases than any other firm in the state.

Indeed, a handful of law firms that specialize in debt collection do the bulk of foreclosures in Minnesota. St. Louis Park's Usset, Weingarden and Liebo is No. 2, handling about 20 percent of the 20,404 foreclosures in the state last year.

And despite reputations of law firms drowning in profit, processing foreclosures is not necessarily financially lucrative. But with enough business, a firm can develop economies of scale and streamline the filing and notification process.

Paul Weingarden, a senior partner in the firm that bears his name, said he makes as little as $50 on some cases after expenses.

"But we make up for it with volume," he said. "It's a systems process. As long as you keep everything on the conveyor belt, the system is fine. Once something falls off the conveyor belt, we lose money."

The housing crunch has certainly given the firms ample cases to work with. After a record number of foreclosures in Minnesota in 2007, the state is headed for a 39 percent increase this year, to 28,282, according to projections released last week from HousingLink, a clearinghouse of information about Minnesota housing. That projection is nearly four times the volume of foreclosures in 2005.

Middle-class foreclosures

Bankruptcy attorneys who hear from many borrowers in foreclosure say people are just giving up and walking away from their homes when they fall in arrears on payments and the mortgage becomes greater than the home's value.

"I'm seeing more and more people who are facing bankruptcy and foreclosure because of the economy," said Patrick Burns, a Twin Cities consumer lawyer. "I don't believe for a moment that the worst has passed.

"Last year I saw the amateur investors [going into foreclosure]. This year I'm seeing more families, the Joe Six Packs of the world. Middle-class suburban families are starting to get hit, and hit hard," Burns said. "It's awful to watch."

Consumer advocates believe that lenders and their lawyers are showing a little more flexibility before pulling the foreclosure plug.

"Things do seem to be getting a little better," said Alexa Milton, regional director for ACORN Housing Corp. "Lenders are doing things now that they wouldn't do six months or a year ago. They realize that it's better getting something from the owner rather than go into foreclosure and [have the property] just sit on the market. Still, more could be done."

Weingarden said his office tries to be proactive with borrowers and offer them opportunities to work through their problems without losing their homes. He said his firm sends letters giving borrowers options. The firm has the latitude to slow legal proceedings and give people more time to pay. But it's up to borrowers, Weingarden says. "If they don't contact us, we can't help them, and that happens far more than it should."

His six-lawyer firm has 40 paralegals, nearly double what it had a year ago, to handle the increasing business. It recently outgrew its office, so it moved into a 10,000-square-foot space, 50 percent bigger than the previous accommodations.

A busy time

Wilford & Geske has been able to quietly operate its foreclosure factory for years. But this year, in a government filing of publicly traded Dolan Media, the firm and its dominance in Minnesota was listed as the newest client for Dolan's American Processing division, which does nonlegal back-room processing of mortgage foreclosures.

"Things have been very busy," said Lawrence Wilford, founder of the firm and a 30-year veteran of the foreclosure business. "We have both more clients [lenders] and the default rate is up."

There's no hourly rate for attorneys who file the cases. Wilford said most of his cases earn his firm a fee of $500 to $650, no matter how much legal work is required. It's a price-competitive field, and lawyers keep the fees low to retain their book of business and search for new market share.

"The fees have been at that level for eight years," Wilford said. "It's a challenge every day, because our expenses have gone up."

Dorraine Larison, an attorney who handles foreclosures in the St. Cloud office of Gray Plant Mooty, said too many consumers are falling into arrears on their mortgages and are unable to keep current on their loans as they try to whittle away at their back payments.

"I think we're going to be busy for a long, long time," Larison said.

David Phelps • 612-673-7269