Settlement of Foreclosure Fee Case Near : $4-Million Agreement May Benefit 110,000 Homeowners in State

As many as 110,000 homeowners could share in the proposed $4-million settlement of class-action lawsuits that challenged fees collected in foreclosures handled by Orange-based T. D. Service Co. on behalf of several banks, savings and loan associations and trust and title companies.

Final details of the settlement, signed by T. D. Service on Wednesday, are to be worked out at a meeting Tuesday before San Francisco Superior Court Judge Daniel H. Weinstein, who supervised eight months of negotiations. Weinstein then will refer the settlement to Judge Ira A. Brown Jr. for review.

In June, 1982, two lawsuits were filed against T. D. Service accusing the firm of paying “kickbacks” to financial institutions that hired it to process their foreclosure proceedings. Typically, T. D. Service would split the fees it collected with the institution, the suits alleged.

Foreclosure Law Amended

The lawsuits contended that the firm’s actual cost of processing a foreclosure was all that a property owner should have to pay and that sharing a foreclosure fee with a trust company that did little more than hire the company to do the processing constituted an illegal kickback.

As of Jan. 1, 1984, the state’s foreclosure law was amended to reduce foreclosure fees and, for the first time, recognize that an agent such as T. D. Service could process foreclosures on behalf of a trustee.

That legislation led to a settlement of the first of the lawsuits, filed by the Santa Cruz County district attorney. Without admitting wrongdoing, T. D. Service and its customers agreed to pay $500,000 to the county’s general fund.

Homeowners were represented in the remaining private lawsuit and two others filed in San Francisco and Los Angeles, which were also part of the settlement announced Wednesday.

Under terms of the proposed settlement, the defendants again admit no liability. Among them are nearly 50 title and escrow companies and more than 30 mortgage brokers, an uncertain number of savings and loans and 21 banks, according to Thomas A. Jenkins, the San Mateo attorney who filed the initial private class-action lawsuit on behalf of half a dozen homeowners.

Scott Keene, counsel for T. D. Service, said the defendants had been caught in a “highly ambiguous” area of foreclosure law that was made clear in the 1983 reform.

Jenkins credited pressure from the lawsuits with bringing about necessary reform.