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Most Americans dread hearing the word “foreclosure,” but for some companies the word sounds like a cash register clicking open.

Each month, hundreds of thousands more homes enter into foreclosure, and according to some reports, as many as 10 million more homes may be foreclosed on by 2012. As a result, banks have increasingly relied on independent law firms to help process and expedite the excess amount of foreclosure filings.

These firms, which some refer to as foreclosure mills, have existed for many years but rose to a new level of prominence and infamy during the recession. Back in 2007, the Wall Street Journal reported that lawyers working at these law firms are usually paid based on how many foreclosure filings they process, which leads them to rush through cases, sometimes employing questionable practices.

According to the New York Times, these firms have been known to levy unwarranted fees against homeowners during the foreclosure process and have even gone so far as to foreclose on homes that were had not in fact defaulted on their mortgage payments. What makes these firms particularly dangerous is not just that they make errors, but by processing claims at super speeds, they allow homeowners less time to review and refute these foreclosure notices and fees.

Yet, for all that is wrong with this practice, these foreclosure mills continue to operate, with many firms processing thousands of foreclosure claims a month and making some serious revenue in return. Experts estimate that some firms earn anywhere from $3 million to more than $10 million a year from this practice.

The firms exist in cities throughout the country including Houston and Atlanta, but Florida is at the eye of the storm. This state has one of the worst foreclosure rates in the country and the situation is so dire in some counties that courts have resorted to fast-tracking foreclosure hearings by keeping them to 20 seconds or less.

In particular, critics have focused on the law firm of David J. Stern, the largest of the state’s foreclosure mills. Last month, the U.S. District Court of Florida’s Southern District filed a lawsuit against this firm on the grounds that they “pursued foreclosures for lenders that didn't own the debt on the homes” and also foreclosed on more than 20 homes before the proper date.

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But it isn’t just Stern’s law firm that’s under the gun. Tuesday, Florida’s Attorney General announced that the state would be launching three new investigations into various firms handling foreclosure cases including the offices of Shapiro and Fishman, Marshall C. Watson, and yes, David J. Stern.

“On numerous occasions, allegedly fabricated documents have been presented to the courts in foreclosure actions to obtain final judgments against homeowners,” the Attorney General’s office explained in a press release. “Thousands of final judgments of foreclosure against Florida homeowners may have been the result of the allegedly improper actions of the law firms under investigation.”

Yet, it’s important to note that lenders - and the housing market as a whole – might also suffer if all of these foreclosure firms shut down for good. Unpopular though they may be, these firms arguably keep the foreclosure process from breaking down all together, which would effectively keep delinquent home owners in limbo.

As the Kansas City Star pointed out in a recent piece about loan modifications, “Allowing delinquent homeowners to remain in their homes for months or years means many of the owners will stop maintaining their properties, which hurts their neighborhoods, and their own delinquency may even encourage neighbors to default, prolonging the housing market's pain.”

That said, we hope these cases in Florida will set a precedent that forces foreclosure mills elsewhere in the country to think twice and slow down when processing claims going forward. After all, the paperwork they process forever alters the lives of the homeowners involved.

For homeowners worried they may be at risk of foreclosure, the most important step is to start a dialogue with your lender as soon as possible, even before a notice appears on your front door.

If the rise of foreclosure mills is evidence of anything, it’s that lenders, like consumers, are overwhelmed by the foreclosure crisis in this country. So if you try to negotiate with lenders early on, they may be more than willing to meet you half way in order to avoid the foreclosure process.

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