TAMPA - The law offices of David J. Stern and an associated company are laying off 70 percent of its combined staff, according to an email sent to employees Thursday. The terminations come two days after mortgage giants Fannie Mae and Freddie Mac severed ties with the firm. "There's been a substantial reduction in staff, it started happening over the past few weeks and many employees received notice today," said Jeffrey Tew, a lawyer representing the Stern firm.

In the e-mail to employees, Stern said the referral of new business has decreased by over 90 percent in the last six months. "While we are doing everything possible to guide the company successfully through these difficult times, these developments mandate that we take immediate action to align the business with current realities," Stern said in the e-mail.

Tew said the firm originally employed about 1,000 people.

The law firm, which handles Florida foreclosures for major lenders, is under investigation by the Florida Attorney General for sloppy work and fabricating key documents used to complete foreclosures.

The attorney general's office last month released two sworn statements by former employees detailing a secret system designed to speed up foreclosures. The employees testified that staff signed documents without reading them or signed them outside of the presence of a notary. The employees allege that attorneys and staff members forged signatures, changed dates and passed around notary stamps.

Some employees were given jewelry, cars and houses from the firm in exchange for altering and forging key documents used to process foreclosures, one of the former employees said in a statement released Monday by the Attorney General.

One employee testified that Stern had relationships with people inside Fannie and Freddie who would tip him off before routine audits. Problem documents were then hidden in conference rooms until the auditors left, the employee told the attorney general.

After the testimony was released, Fannie and Freddie sent auditors in to examine files. Both companies announced Tuesday they terminated their relationships with the firm and were removing all of their files from Stern offices.

Two weeks ago, Stern's mortgage document processor DJSP Enterprises Inc. said it would terminate an additional 198 employees as the volume of work shrinks. That company has laid off a total of 300 people, the company said.

DJSP was spun off into a publicly traded company by Stern. The company handles work for his law firm.

Reporter Shannon Behnken can be reached at (813) 259-7804. Follow her on Twitter @TBORealtyCheck