Connecticut AG opens probe into foreclosure law firms

NEW YORK (Reuters) - Connecticut Attorney General Richard Blumenthal has asked Fannie Mae (FNM.P), Freddie Mac (FRE.P) and mortgage processor Lender Processing Services Inc (LPS.N) for information on why only a handful of law firms are handling most foreclosure proceedings in the state.

Blumenthal on Monday said his office is examining why foreclosures are being concentrated in only "a few select law firms." He also said he is examining complaints by consumers who believe they did not receive proper foreclosure notices from marshals.

In June 4 letters to the companies, Blumenthal said consumers were being charged excessive fees on foreclosure actions, and that some marshals are receiving "astronomical fees" in connection with foreclosures.

"Dominance over foreclosure service by a few select law firms and marshals has spurred complaints about improper or illegal practices: wrongfully allocating work to non-marshals, forging papers, failing to serve papers, and making kickbacks," Blumenthal said in a statement. "A scarce few are spinning foreclosures into fortunes, and perhaps deepening homeowner despair."

Fannie Mae and Freddie Mac are mortgage financiers now controlled by the federal government. Lender Processing Services is a Jacksonville, Florida-based company spun off last year by Fidelity National Information Services Inc (FIS.N)

Brian Faith, a spokesman for Fannie Mae, said that company would cooperate with Blumenthal's investigation. Freddie Mac and Lender Processing Services did not immediately return calls seeking comment.

(Reporting by Jonathan Stempel; Additional reporting by Patrick Rucker in Washington, D.C.; Editing Bernard Orr)