Boy, you have to love the way beleaguered companies strain to create the impression that unfavorable revelations are “mischaracterizations.” And Lender Processing Services certainly has its back to the wall. Its stock traded down 5% on Friday and another 8% today before it halted just prior to the close of trading on Monday. (for more detail on LPS’s business model, see our related post today).
Recall that over the weekend, the site 4ClosureFraud disclosed a sheet listing services offered by LPS through its subsidiary, DocX, which as we discussed in some length, included “creating,” meaning fabricating, documents out of whole cloth for the purposes of allowing foreclosures to proceed.
LPS provided a press release attempting to rebut some of the concerns, but what was revealing was how much was tacitly admitted. The first part of the press release focused on the creation of improper affidavits, which of the problems facing LPS is comparatively minor (it’s a much bigger headache for the servicers). Here LPS claims it stopped signing affidavits for clients (meaning servicers) in 2008, and when it did so, “affidavits were prepared and provided by the lenders’ or servicers’ attorneys. These affidavits were then executed by LPS consistent with industry practice.”
In other words, there is no denial that there might have been improprieties. If there were, LPS is basically claiming it was just operating at the behest of the servicer. In other words, it just threw its clients under the bus.
The more troubling charges, the document fabrications are addressed in the second half of the press release and are equally artful. It contends that the subsidiary, DocX, was “small.” Well yes, because LPS charged bupkis for this activity; small in revenue terms does not mean small in terms of activity levels. This is an admission of the questionable practice; LPS is trying to minimize its significance. It was only in the business in 2008 and 2009. And it served “only” two lender/servicers (what, like JP Morgan and Wells Fargo?)
And you have to love this part:
During its operation, when lenders/servicers or their attorneys requested that Docx prepare an assignment of mortgage, the lenders/servicers or their attorneys provided the necessary borrower information, which was downloaded by Docx employees into a pre-approved document template. The document was then printed and either signed by the lender/servicer or Docx, pursuant to corporate resolution. Docx did not determine whether these documents were then used in a court proceeding – those decisions were made solely by the lenders/servicers or their attorneys.
In other words, speak no evil, hear no evil, see no evil.