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Yet Another Cost of Doing Business Fine: Lender Processing Services Settles with 46 Attorneys General for $127 Million

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All you need to know to get confirmation that Lender Processing Services got a great gift is to look at what its stock did on the day of the announcement of its $127 million settlement with 46 chump state attorneys general, on a day when the market was down generally:

New York’s attorney general Eric Schneiderman had the temerity to tout the settlement:

“Lender Processing Services, Inc., LPS Default Solutions and DocX cut corners in order to maximize their profits,” said New York Attorney General Schneiderman. “My office will pursue any company that generates false or robo-signed documents that are used to foreclose on New York homeowners.”

The proposed consent judgment resolves allegations that the Jacksonville-based company “robo-signed” documents and engaged in other improper conduct related to mortgage loan default servicing. LPS Default Solutions and DocX primarily provide technological support to banks and mortgage loan servicers.

Among other things, the settlement prohibits signature by unauthorized persons or those without first-hand knowledge of the facts attested to in filed documents, enhances oversight of the default services provided, and requires review of all third-party fees to ensure that the fees have been earned and are reasonable and accurate. The settlement also:

· Prohibits LPS (including DOCX) from engaging in the practice of “surrogate signing” of documents;

· Ensures that LPS has proper authority to sign documents on behalf of a servicer, if in fact it is signing documents;

· Requires LPS to accurately identify the authority that the signer has to execute the document and where that signer is employed;

· Prohibits LPS from notarizing documents outside the presence of a notary and ensures that notarizations will comply with applicable laws;

· Prohibits LPS from improperly interfering with the attorney-client relationship between attorneys and services;

· Prohibits LPS from incentivizing or promoting attorney speed or volume to the detriment of accuracy;

· Requires LPS to ensure that foreclosure and bankruptcy counsel or trustees can communicate directly with the servicer;

· Requires LPS to have enhanced oversight and review of processes over third parties it manages, including those entities that perform property preservation services;

· Prohibits LPS from imposing unreasonable mark-ups or other fees on third party providers’ default or foreclosure-related services;

· Requires LPS to establish and maintain a toll-free phone number for consumers concerning document execution and property preservation services (including winterization, inspection, preservation, and maintenance); and

· Requires LPS to modify mortgage documents that require remediation when LPS has legal authority to do so and when reasonably necessary to assist a consumer or when required by state or local laws.
In the settlement, LPS stipulated to important facts uncovered in the investigation, including the practice by DocX of so-called “surrogate signing,” the signing of documents by an unauthorized person in the name of another and notarizing those documents as if they had been signed by the proper person.

Once the judgment is entered by the courts, LPS will undertake a review of documents executed during the period of January 1, 2008 to December 31, 2010 to determine what documents, if any, need to be re-executed or corrected. If LPS is authorized to make the corrections, it will do so and will make periodic reports of the status of its review and/or modification of documents. Consumers may also call the LPS toll-free number and request review and correction of any documents executed by LPS at any time.

As we recounted at length on this blog, the issues with LPS go well beyond robosigning. “Robosigning” was a convenient label to divert attention from the fact that the party that was attempting to foreclose didn’t merely have improperly executed documents, which is what this lame settlement would lead you to believe. It was that it was often the improper party, raising a host of issues (borrower exposure to liability from the proper party, which has occasionally turned out to be a real issue, clouded title). I happened to speak to a reporter on the mortgage beat one of the major New York papers, and that individual was sputtering about the settlement.

Worse, notice how this settlement institutionalized the undermining of procedures that go back to the 1677 Statute of Frauds. LPS is permitted to sign documents on behalf of a servicer if it is authorized to do so. But a bedrock concept of the law has been that evidence submitted in court (an an affidavit stands in lieu of testimony) is based on personal knowledge. LPS does not know the integrity of the underlying servicer systems (and our Bank of America series confirms our suspicion that they often suck). Is it going to be, as before, that servicers file affidavits attesting as to the amount the borrower owes? We might as well throw our judicial system down the toilet if so.

The one small bit of solace is that New York state’s court system has put in a much tougher certification requirement regarding evidence submitted in foreclosures, so that might explain why Schneiderman can be so cavalier. But also notice there is no mention of monitoring or enforcement in the settlement, and all these promises to do better mean squat without them. We plan to look at the agreement when filed, but we aren’t optimistic that it will have any teeth.

I can’t fathom how the Administration and its allies think that these efforts to put band aids over gangrene are going to restore confidence in the housing market. Anyone buying a house with a mortgage in America is putting themselves at risk of being abused by their servicer and suffering severe financial harm. I suppose the American love affair with housing will prove to be yet another exercise in hope over experience.

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32 comments

  1. AbyNormal

    11/21/12 In the Florida inspector general’s report, the state’s top economic crimes boss Richard Lawson said the practice of “surrogate signing” is not forgery because it was approved by the company and forgery requires an intent to defraud.

    http://www.palmbeachpost.com/news/business/real-estate/feds-charge-robo-signer-boss/nTB23/

    People speak sometimes about the “bestial” cruelty of man, but that is terribly unjust and offensive to beasts, no animal could ever be so cruel as a man, so artfully, so artistically cruel. Dostoevsky

    1. monday1929

      I have “forged” several Citibank documents involving large dollar amounts. There is no fraud involved, and no intent to defraud, just to save a few thousand dollars in legal fees. NC readers- take advantage of the freedom the Elites have given to us: there is no Rule of Law. I follow my own laws now.

  2. diptherio

    It’s official: Schneiderman has sold us out. What a joke this settlement is. I wonder what that $127 million works out to on a per-fraudulent-document basis? I’ll guess it’s less than $5 a piece.

    1. ex-PFC Chuck

      Schneiderman sold us out the day he signed on with the Obama administration. Or perhaps they had something on him (a la Eliot Spitzer) and made him an offer he couldn’t refuse.

      1. banger

        Some people believe that to have position of authority “they” have to have something on you. I’m not sure of that specifically but I do know that there is an informal oligarchy that does run things and has since ’63 at least. For example, I recently found out that there are people out there who claimed to have seen a picture of J. Edgar Hoover performing oral sex on his boyfriend–this pictures was supposed to have been in the hands of Sam Giancana the mafia chieftan which is why (and this is no secret) the FBI refused to admit that there was such a thing as organized crime and one reason Hoover hated RFK’s investigations into the mafia.

        1. ex-PFC Chuck

          Tim Weiner, in his recent book Enemies: A History of the FBI, claims he found no evidence of an homosexual relationship on the part of the Hoover. But then, perhaps there was something in the agency’s files on the author.

          Several months ago I saw an interview with Michael Bechloss on book TV regarding his Lyndon Johnson tapes project in which he described a phone conversation between the president and Earl Warren in which he blackmailed the Chief Justice into serving as chair of the Kennedy assassination commission after twice refusing Johnson’s prior appeals to do so. He said that when Johnson mentioned that it would be a shame if some incident in Mexico were to become public knowledge, Warren broke down in tears and capitulated. I’ve been unable to find anything in text via Google, but here is the link to what I believe is the BookTV program:
          http://www.booktv.org/Program/13773/In+Depth+Michael+Beschloss.aspx

      2. Nathanael

        Yep. This is a “license to commit fraud” settlement.

        Because the US prohibited private prosecutions and sabotaged the grand jury, this sort of collusion-in-crime by Attorney Generals makes it impossible to convict or punish criminals who are favored by Attorney Generals.

        The one good thing is that it is impossible for attorney generals to waive people’s rights in civil court. We may have to find a way to get imprisonments through the civil court if the “criminal” justice system has gone completely corrupt. I think such procedures are still on the books.

    2. monday1929

      Fraud on the court is “cutting corners”. Remember, this only enlarges the scope of behavior YOU can now engage in. Do not be dismayed, NC scribblers, be FREED.

    3. DeadlyClear

      Companies like LPS should be driven out of business – I think we all agree. But how in the world is anyone still buying their stock?! How foolish is that?

      As I’ve commented before, a lawsuit win will only be as good as the amount of money that is available to pay out – without throwing the dirtbags into bankruptcy.

      The problems with ALL of these piss-poor pittance settlements is that they are not made NON-DISCHARGEABLE. And it would be better to include an action, such as voiding all of the documents that they fabricated in addition to the pathetic sliver of a settlement considering all of the damage that has been done.

  3. dejavuagain

    I not only will not ever vote for Schneiderman, but will actively support any opponent of his.

    End of story.

    Most opportunistic sell-out in this entire story – I think even worse than Holder and his minions.

  4. Tom

    “Evidence submitted in Foreclosure” – as if ‘evidence submitted’ has somehow got it’s own special bar when foreclosure is attendant. Meanwhile, the evidence tampering goes on under some miscarriage of justice or another.

    What is it that is going on? Look at the BofA and OCC “investigation” into harm – What do ya see? I see a deliberate system set up to change documentation, get dates lined up, shine-up the records and make the puzzle pieces fit – that way no findings of criminal negligence will be found in court.
    It would be like, for instance – I committed some crime where I left behind all sorts of evidence. The investigator finds three forms of my identification left behind and hauls my ass to the crime scene.
    I confesse to the crime.
    The investigator tells me to clean-up the crime scene…he points out my fingerprints and tells me to clean it up…he watches over my shoulder to insure that all evidence is wiped clean.
    Then the investigator says; ‘look pal, next time be a little more careful… I hope I have taught you a lesson. Now, if we missed something here, the judge will let us clean out the evidence locker and it will go smoothly… now get out of here and, don’t forget to clean up behind yourself next time….beers at the bar are on you tonight…K

    1. Nathanael

      That is indeed a good description of what we’ve been watching.

      This sort of stuff — noblemen simply being allowed to get away with crimes — happened under the Tsarist regime and under the ancien regime in France.

      1. sd

        Worked for a while until the people took the rule of law in to their own hands.

        The peasants always revolt. Always.

  5. down2long

    To keep from buying an AK-47 and exercising my 2nd amendments rights and going jihad on all these horribly complicit gov’ment wastes of human flesh, I have been working on a mental Rubik’s cube of various forms of the black comedy series the “Three Bank Stooges.” First, we have Holder, Breuer, and Khuzami, and the fourth occasional stooge, Schneiderman, who – depending on Mary Jo White, who is set to become the first female stooge- may become a permanent stooge.)

    There is Three Bank Stooges set two, (different movie, same script, just like the old Doris Day/Rock Hudson pics) Obama, Geithner (soon Lew) and Bernanke.

    Official Bank Stooges: Lyin Dimon, The Orifice of Omaha, and a rotating cast Stumpf, Rubin (who is rumored to be dead or in hiding from the Mob of pissed of Americans who have yet to find their mojo) and any other bankster CEO who is hot that week.

    Anyone can play.

    Year five of fighting Wells (servicer) BofA trustee, Morgan Stanley (Trustor) refusing to take my payments in order to foreclose. Yeah, LPS is in there too.

  6. Blurtman

    Will folks cease using the LPS RE data, then, or at least preface it by saying that the data has been generated by a criminal enterprise? Calculated Risk, please take note.

  7. dolleymadison

    After getting a dismissal with prejudice – FOR LACK OF STANDING – in October, I get a thretening letter yesterday from Ocwen sayign they are putting forced placed insurance on my home. (I switched carriers who m,ust have notified them) FIrst of all my insurance has never been escrowed. Second of all, you have no standing, what the hell? THe thing that worries me about these “settlements” is the institutionalizing of fraud. ARe there no limits, have they no shame?

    1. Nathanael

      Good God. You have to sue them again now, I guess. This time sue for fraudulently claiming that you owe them money?

  8. dolleymadison

    The servicer did in fact present an affadavit in my case attesting to amount due – and overstated my contractual amount by 500 dollars. When I pulled out my closing papers showing contractual amount, the FC mill idiot just says – I have an affadvait from the servicer. And the Clerk goes, “Oh okay!” Unbelievable. So they added 500 a month for 5 years, plus a 50 charge per month for a “partial payment” plus the payments they put into suspense to trigger FC plus fees, etc – they were asking for almost 50,000 not counting my principle to which they also added 20,000 for “fees”. Never mind they accepted my payments with no complaint for 4 of the five years until they inexplicably tried to foreclose (was not in default). And the clerk says “Oh, okay.”

    1. Nathanael

      I guess you have to immediately state “That affadavit is fraudulent. I have evidence that it is fraudulent, and the servicer has a record of committing fraud.”…. and then figure out what motions you need to file to allege fraud.

  9. Westcoastliberal

    Schneiderman is such a disappointment. This “settlement” is garbage; not worth the paper it’s written on. No wonder LPS’s stock went up. And no compensation for those they defrauded. Amazing!

  10. Fraud Guy- Also

    It appears that a winning investment strategy is to invest in companies under a cloud of potential legal sanction. Law enforcement authorities seem incapable of ever assessing a financial penalty even equal to what “the street” expected (which would cause the stock price to remain unchanged), but instead always manage to pleasantly surprise traders with a lower than expected penalty that causes the stock to “pop”. Of course, we NEVER see a penalty greater than expected that hurts the stock price.

  11. David Petraitis

    Yves, you close with:
    “Anyone buying a house with a mortgage in America is putting themselves at risk of being abused by their servicer and suffering severe financial harm. I suppose the American love affair with housing will prove to be yet another exercise in hope over experience.”

    The American love affair with housing turns out to be an exercise in how bankers and capitalists can fleece the people for financial gain in the form of liars loans for a period of time and then turn on them and avail themselves of the title and (fraudulently) of the property itself, and then to turn once again and sell it all to the credulous one more time (with feeling…)

    This is NOT “hope over experience” of the homeowners and the American people. Wasn’t that one of Timothy Geithner’s excuses for the errors of regulators during the meltdown? And I don’t think that is what you meant. That puts the shoe on the wrong foot. It is a phrase which downplays the utter seriousness with which the looting in this game is played by the authors of that looting. This is the total amoral experience and praxis of capitalists playing their game and not ‘caring’ (as if that was in their DNA!) what happens to the shill. To place blame on the homeowners even in this sort of offhanded way is not what nakedcapitalism has been about for years.

    You’ve adequately argued long and consequently on this blog that hope and experience on the part of the people is not enough. Tough laws, uncorrupted legislators, serious regulators and persistent prosecutors are what is needed. We don’t need to hope for them we need to make them happen in a democratic way.

  12. Cheryl Kelmar

    Select Portfolio Servicing, a 3rd party debt collector, out of Salt Lake City NEEDS to be investigated for criminal activity. I have reported them to EVERYONE, and still NO response. SPS claims to have my Original Note with NO Allongees or endorsements, and they robo-signed an assignment in the name of MERS using the name Bill Koch 7 years after the REMIC closed. The REMIC closed in 2006, and they made an assignment after I sued in in 5/2012.

    Why are California law makers sleeping? …is it because of the deal Diane Fienstein made with the FDIC in 1/2009 where her husband’s company would get foreclosed homes at penneys on the dollar; even though he had NO prior experience.

    I thought Diane was voted into office to represent us, NOT her own greedy pursuits at our expense. Also, why are we tax payers paying insurance through government loan guarantee programs for banks to collect 90% of the homes value (where the bank then also get the house)

    …and why are Judges in California participating in mortgage fraud. See my upcoming websites: judgephilipgutierrez and judgedonnageck.com where I make their fraud very very easy for the layman to see.

    NO wonder the 2/2012 Aequitas audit cites that 85% of foreclosures in California are illegal; done by ‘Strangers to the Deed of Trust,’ using robo signed and fraudulent documentation.

  13. Bravo

    So…..the cops on the beat belatedly confirm that a multibillion heist of consumers has occurred and then propose that the stooge the thieves constructed to pull it off (LPS) be sentenced to a paltry fine that is a tiny fraction of what the suddenly shuttered foreclosure reviews were about to establish had actually been stolen? Which ever judge signs this consent order will go down in history as the best judge money ever bought.

  14. Stupendous Man - Defender of Liberty, Foe of Tyranny

    “We might as well throw our judicial system down the toilet if so.”

    Allow me to rephrase on your behalf, Yves:

    “Our judicial system has already flushed justice down the toilet.”

  15. Bravo

    Havent we seen this movie before? Cops.robbers, stooges, politicians, judges all in it it together? I believe the title was “The Chicago Way”.

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