MIAMI (Reuters) - A Florida law firm once used by mortgage finance giants Freddie Mac and Fannie Mae and now under investigation for its handling of foreclosure cases has laid off hundreds of employees, a lawyer for the firm’s owner said on Thursday.

The Florida attorney general’s office is investigating the law offices of David J. Stern in Plantation, Florida, and has publicly released a deposition of one employee alleging workers at the firm forged notarized documents.

Freddie Mac and Fannie Mae have said they have ended their relationship with the Stern law firm because of questionable practices.

Jeffrey Tew, a lawyer who represents Stern, said the firm has cut its staff from 1,000 employees to around 400 to 500 in recent weeks “as a result of Fannie and Freddie and some other clients not continuing to send work.”

A wave of layoffs came on Thursday, he said.

Florida Attorney General Bill McCollum and attorneys general from the other 49 U.S. states are probing allegations lenders like Bank of America, JPMorgan Chase and Co and GMAC Mortgage, among others, failed to properly review foreclosure processes and may have submitted faulty documentation to evict delinquent borrowers.

Florida, which has the third-highest foreclosure rate in the United States after Nevada and Arizona, is a base for some of the biggest law firms handling foreclosures.

Fannie Mae has identified and issued retention letters to nine new law firms to help manage future foreclosures, according to a recent letter sent to Congress by the company’s chief executive, Mike Williams.