In October, Lender Processing Servicer was targeted in two lawsuits, one filed in Federal bankruptcy court, both alleging illegal sharing of legal fees. The Federal suit sought class action status and was joined shortly thereafter by the Chapter 13 bankruptcy trustee for Northern Mississippi on behalf of herself and all other US Chapter 13 bankruptcy trustees as a class.
Lender Processing Services dismissed the suit as a “fishing expedition“. Funny, it appears the judge does not agree. I hope to get a transcript of the hearing on Friday, since he authorized the case against both firms moving into discovery and from what I understand, not on a very narrow basis as both defendants had sought.
If successful, this litigation would do tremendous damage to LPS. As we noted earlier:
The common remedy for illegal fee sharing is disgorgement. Remember the magnitude of this business: it accounts for nearly half of LPS’s revenues. LPS is a pretty levered operation, with a debt to equity ratio of over 3:1. It isn’t hard to see that success in either of these cases would be a fatal blow to LPS. Similarly, if the allegations are proven true it could have ramifications for all servicers who do business with Fannie and Freddie since they are not supposed to be involved in referring work to a vendor who pays a kickback for a referral.
And of course, the discovery process is likely to reveal some pretty ugly facts about the dirty work that LPS does on behalf of servicers. Stay tuned.
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Thanks again Yves for the heads up. These recent judicial decisions maybe mean that there are still a few people that
believe in rule of law.
Between this and the growing discomfiture of MERS, we’re steadily moving up the food chain in the same way organized crime networks are often brought down.
Of course the difference in this case is that except for some rogue judges, “the authorities” are working for the gangsters and don’t want the justice process at all, let alone for it to continue upward. That’s why there haven’t been and seemingly won’t be any indictments of these smaller fish. The Iowa AG got temporarily carried away with his grandstanding but then fell back into line on that one.
“we’re steadily moving up the food chain in the same way organized crime networks are often brought down.” That’s the way I have been thinking about this recently. These foreclosure rackets are indeed criminal networks: originators draw in the marks (homeowners), hand them off to securitizers (TARP banks), then disappear. Securitizers hire servicers to use MERS to scramble the trail of clues (3-card Monte, forgery) and enable the securitizers to “assign” the mortgages into multiple trusts simultaneously (double-pledging, forgery, perjury). The trustees (TARP banks) use PSAs to create shares/certificates, sell the shares (boiler rooms) to a new round of marks, then feign innocence when defaults balloon and the trusts go bust. Everybody sues everybody and the TARP banks walk away with the cash.
These are Ponzi schemes on steroids. Rocket fueled structured investment vehicles headed to the moon.
This 3-part Randall Wray series, starting with part one here:
http://www.huffingtonpost.com/l-randall-wray/merss-smoking-gun-part-1-_b_794713.html
is the most comprehensive depiction I’ve read of mortgage securitization as a vast, premeditated criminal conspiracy starting in the latter 90s.
I already thought that, but this piece helped focus more of my thoughts.
I hate to tell you but a lot of what Wray has in that series is wrong or overstated so badly as to play into the hand of the industry.
What’s an example of a major factual error? The only major discrepancy with what I read here is the way he keeps agreeing with MERS that the servicer usually has the note, whereas here I read that the originator probably still has it. So that may be important for people actually fighting foreclosures.
I don’t know what “playing into the hands of the industry” means in this context. Does that mean you think lawyers are going to read a Huffpo piece and file technically defective lawsuits based upon it? I didn’t know lawyers functioned that way. At any rate the target audience for the piece isn’t a legalistic one, but a political one.
But in the end this war isn’t going to be won according to legalistic parsing. It’s a Hobbesian political struggle. Maybe Wray’s account isn’t 100% sound in all the details. (Who knows what the “correct” details are? The banksters intentionally generated legal chaos here, precisely in order to obscure all details of truth.)
But it’s clearly true in essence, and it’s the kind of narrative, pulling everything together into one big picture, that the people will need to comprehend.
Kudos to you for your efforts to make this happen. May you have more success in bringing more balanced rule of law to our world.
OT
When the word “conspiracy” is brought up in the mass media; it tends to be associated with windmill-tilting nutjobs.
In fact, there are real conspiracies happening all the time. Just look at the wiki page for RICO. The SEC Acts of 1933-34 specifically deal with conspiracy to commit securities fraud. Salaries of SEC employees are trivial with respect to the amounts of money involved by conspirators. Small wonder that the SEC looks the other way to the extent it does.
If you look at the banking/economic history of the last 30 years as an insurgency, there are striking similarities:
1. cell-networks that maintain secrecy => individual frauds linked by key individuals (Lewis Raineri, Robert Rubin, Madoff?)
2. terrorism used to foster insecurity among the population and drive them to the movement for protection (psy-ops and orgs to get the public to move their savings to skimmable accounts like money market funds and 401ks)
3. multifaceted attempts to cultivate support in the general population, often by undermining the new regime (convince the public they can retire wealthily while creating a shadow banking system handle the funds) see number 2
4. attacks against the government (infiltrate enforcement agency (SEC) (Treas)(FRB) to divert/prevent investigation or provide intel to facilitate covert operations
1. insurgencies generally based on an ideology-in this case materialism, worship power and control
2. outside entities to facilitate/support the insurgency due to mutual interest => Chinese govt + US econ leadership
Yep, you have the right idea..pretty mindblowing what can be accomplished when nobody is held accountable????
It has to crack sooner or later. At what point in the proceedings would the evidence enter the public domain?
It will interesting to see how much of the servicers’ business model is based on asymmetry in the social contract. In other words, keeping the consumers bound to the contract with harsh laws, social mores, selective enforcement, thumb-busters, ideologies, theologies, etc., while allowing the seller (lender) absolute freedom at all times. I don’t think anyone was really fooled by those forgeries. They just chose a group they wanted to win and made things up to suit.
If there were a real investigation, one thread would follow the identities of the people who received a share of the fees. Not all judges are blind ideologues who dismiss anyone who works for a living as underclass. Sometimes a judge’s wife, brother, or friend can be trusted. Mr. Green comes to court, indeed.
None dare call it Treason. Or corruption.
FYI, the court reporter said the transcript from the hearing would probably be available toward the end of next week.
Thanks!