Mortgage servicers, already bracing for a 25% jump in foreclosures this year, begin to worry about lawsuits brought by borrowers facing foreclosure actions.

Servicers face a barrage of suits for alleged violations of the Fair Debt Collection Practices Act, for the "reasonableness" of fees, and for the accuracy of evidence submitted to courts in the foreclosure process, Michael Feiwell, a lawyer at Feiwell & Hannoy PC in Indianapolis, said in an interview last week.

Almost any element of the process is open to scrutiny. For example, voice mail messages left by mortgage servicers are "a tricky topic," he said. "Courts are starting to pay a lot more attention to the evidence submitted in foreclosure cases," Mr. Feiwell said. "The litigation risk is growing."

In one recent case, a state court in Florida ruled last year that Litton Loan Servicing LP of Houston violated collection laws when an employee left a message on a borrower's mother's answering machine -- even though no information was given about the debt.

Mortgage servicers said they are paying closer attention to regions with high foreclosure rates to create loss mitigation strategies.

The industry is also watching how federal and local governments react to expectations of another increase in foreclosure rates this year.

On Monday the American Financial Services Association said it has asked the Senate Banking Committee to have the Government Accountability Office conduct an independent study of foreclosure rates. "The vast majority of delinquencies and foreclosures are not due to loan terms or products, but rather to the same factors that have led to delinquencies and foreclosures historically: job losses, divorce, and medical problems," said Lynne Strang, an AFSA spokeswoman.

Only completed foreclosures, not proceedings, indicate that a borrower has actually lost their home, Ms. Strang said.

A study released last year by the Center for Responsible Lending estimated that one in five subprime mortgages originated since 2005 eventually would end in foreclosure, affecting 2.2 million homeowners.

That is an estimate some in the industry have sought to downplay. Still, studies like that one are part of the reason that John Robbins, the Mortgage Bankers Association's chairman, said that the mortgage industry "is under a media microscope" and needs to combat the perception that it is profiting from delinquent borrowers. "We all know that a foreclosure is a money-losing proposition," he said last week at a conference his group hosted in San Diego. "And of all the loans that enter foreclosure, only 25% complete the process."

Some see that number rising, however. Rick Sharga, vice president of marketing at RealtyTrac Inc., an Irvine, Calif., provider of foreclosure data, said the number of properties entering some stage of foreclosure last year jumped 42% from the year before, to 1.2 million.

Mr. Sharga is forecasting what he described as a "conservative" increase of 20% to 25% for this year, and he said he is not certain when the upswing will end. "This is a very unique time in the industry in terms of the mix of loans out there," he said. "The real estate market is soft, so many people in foreclosure have trouble selling their homes."

Because mortgage servicing is a highly automated business, many companies are looking for ways to identify risky borrowers before they go into default, in the hopes of working out problem loans.

Diane Mitchell, the senior vice president of default administration at Select Portfolio Servicing Inc., a Salt Lake City mortgage servicer owned by Credit Suisse Group, said in an interview last week that a greater number of servicers are using risk modeling and preforeclosure reviews specifically to avoid litigation than had in the past.

She said her unit provides "as much transparency" as possible to borrowers but does not give reinstatement or payoff estimates, because doing so has been contested in court. (In the foreclosure process, a borrower typically has three months to reinstate or pay off the loan before a foreclosure sale date is set.) "You have to look at changing up the rules," she said. "Taking the time before you pull the trigger" on a foreclosure "is going to be helpful."

Older vintage mortgages are "performing well," Ms. Mitchell said, but she expects a surge in defaults for subprime mortgages originated last year. "A lot of borrowers used their homes simply to get free access to cash, and the value of their property has gone down, so they can't refinance their way out," she said.

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