RCO Legal, once one of the largest foreclosure law firms in the Northwest, is shutting down permanently in December, a victim of the strong economy and housing market.
Joshua Schaer, an RCO lawyer, informed a federal judge of the pending shutdown in a Dec. 4 court filing. "RCO Legal is closing all offices in Washington and nationwide, and (my) employment with RCO Legal will be terminated as of Dec. 12, 2017," Schaer wrote.
The pending closure comes barely a month after the U.S. Justice Department accused Northwest Trustee Services, RCO's controversial parent company, of illegally foreclosing against 28 veterans.
The impact of RCO's closure on Northwest Trustee is unclear. The company did not return multiple phone calls and emails.
Lance Olsen, a former partner of RCO back when it was known as Routh Crabtree & Olsen, said his former firm is a victim of what he called the "foreclosure bust."
"The faucet turned off in a big hurry," Olsen said. "Far more loans are being modified than being sent to foreclosure. That combined with a strong housing market, the business just isn't there."
Though its roots go back 40 years, Northwest Trustee and RCO attained a new prominence after the great housing bust of 2008. It represented lenders who were foreclosing on delinquent homeowners at rates not seen since the Great Depression. RCO is based in Bellevue, Wash., but has offices in Portland, Ore., and in several other states.
Co-founder Steven Routh built a full-service, vertically integrated foreclosure firm that handled 48,000 foreclosures a year after the housing sector tanked. The RCO law firm would represent lenders, the title company handled escrow and title, and process servers posted foreclosure notices. It even provided auctioneers to conduct foreclosure sales.
Northwest Trustee bought several small newspapers around the region in hopes of saving money on the legal notices foreclosing lenders are required by law to post.
"The business model worked when there were foreclosures everywhere," said Ann Chapman, a Portland bankruptcy attorney who is not affiliated with the firm. "But that's no longer the case. It was a stunner to us. RCO has been around a long time."
The financial industry helped create the housing bubble with its easy-credit lending standards. The market crashed in in 2007 and 2008, sending the American economy into the deepest recession since the Great Depression.
Lenders tried to rebound with a massive foreclosure campaign that cost an estimated 10 million Americans their homes.
Thriving off the crisis earned Northwest Trustee and RCO plenty of notoriety. Northwest Trustee was sued hundreds of times by homeowners challenging their foreclosures.
Decorated war veteran Jacob McGreevey was one of those homeowners. He claimed his lender, PHH Mortgage, and Northwest Trustee violated the Servicemembers Civil Relief Act when it foreclosed on his Vancouver, Wash., home in 2010, just a month after he returned from duty in the Middle East.
Congress passed the law to protect members of the military and veterans from bill collectors while they're serving or immediately after mustering out. McGreevey lost at the district court level but appealed. Then, last month, the U.S. Justice Department sided with McGreevey and sued Northwest Trustee, claiming it wrongfully foreclosed on McGreevey and nearly 30 other veterans.
"Our investigation revealed that Northwest Trustee Services repeatedly failed to comply with laws that are meant to ensure our service members do not have to fight a two-front war — one on behalf of all of us, and the other against illegal foreclosures," said Annette Hayes, U.S. Attorney in Western Washington.
On Nov. 10, Northwest Trustee issued a defiant statement. "This is nothing more than a baseless lawsuit by the federal government," said general counsel James Galbraith.
"The fact is, Northwest Trustee Services has always supported our brave men and women in uniform and has a rigorous vetting system in place to ensure that they are protected from foreclosure."
Galbraith said Northwest Trustee had launched an internal review of thousands of documents. "Based on our findings," he said, "we believe the federal government is wrong and expect vindication in a final ruling."
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