Welcome to our new readers from the FCIC.
Lender Processing Services, a crucial player in the residential mortgage servicing arena, has been hit with two suits seeking national class action status (see here and here for the court filings). If the plaintiffs prevail, the disgorgement of fees by LPS could easily run into the billions of dollars (we have received a more precise estimate from plaintiffs’ counsel). To give a sense of proportion, LPS’s 2009 revenues were $2.4 billion and its net income that year was $276 million.
These suits, one of which was filed late last week, the other Monday, appear to be the proximate cause for the sharp drop in LPS stock, which fell 5% on Friday and 8% Monday (trading was halted just prior to the close of the trading day).
Those close to the foreclosure process have lodged many complaints against LPS. But the two suits we highlight here level the most serious and wideranging allegations thus far.
By way of background, we’ve described issues with foreclosure mills and the flaws in the securitization process at some length in previous posts (see here and here for some recent posts which contain overview material). As evidence about problems with the foreclosure process have surfaced at more and more servicers, one of the common themes has been that a substantial portion of the foreclosure process was outsourced to various processing companies. Foreclosure defense attorneys have cited one firm, called Lender Processing Service (LPS) as one of the largest as well as more problematic firms in the outsourced foreclosure business. In addition, by 2008, LPS had purchased a company called DocX, the company responsible for the “document production” price sheet cited here earlier.
LPS is effectively in three lines of business (which are organized in two divisions): Technology, Data, and Analytics; Loan Services, and Default Services. The suits focus on the practices of the Default Services operation, which contributed $1.137 billion, or 48% of total revenues. The allegations set forth in the suits involve its Default Services, which organizes and manages foreclosures (including property management and REO auctions) on behalf of servicers.
But the rub in this line of business is that the servicers are technically not the clients. LPS acts a sort of general contractor, farming out various tasks to both internal staff as well as outside firms. But LPS’s business pitch to the servicing industry was that it would come in and use a technology platform and provide (if desired) a turnkey solution, FOR NO ADDITIONAL COST than what the servicers were already paying on foreclosures.
How could that be? All of LPS’s revenues in Default Services come from the lawyers in the national network of foreclosure mills that LPS has developed over time. Note that these cases may be filed in state court or federal bankruptcy court, depending on the situation of the borrower. In a routine foreclosure, all legal actions will be filed in state court. If the borrower has filed for a Chapter 13 bankruptcy, the Federal bankruptcy court has jurisdiction. In theory, the bankruptcy filing stops the actions of all creditors until the borrower has worked out a payment plan with the court. But in these cases, LPS and its network firms are seeking to break the bankruptcy court time out and grab the borrower’s house (the legal procedure is “motion for relief of stay”).
To illustrate the degree of control LPS exercises over its network: we have been told by an LPS insider that the software that LPS uses to coordinate with all law firms in its network, LPS Desktop, incorporates a scoring system called 3/3/30. When LPS sends a referral on a foreclosure, the referee is expected to respond in three minutes. When it accepts the referral, it is auto debited (ACH or credit card). In three days, it is expected to have filed the first motion required in pursing the case, and it is expected to have resolved the case in 30 days. Firms are graded according to their ability to meet these time parameters in a green/yellow/red system. Firms that get a red grade are given a certain amount of time to improve their results or they are kicked out of the network.
The cases describe the many fees between LPS and the network law firms. The terms of standard agreements provide for the payment of $150 at the time of referral (the first 3 in the 3/3/30 standard above). Network firms allegedly pay other fees as various milestones are reached, and these are couched as fees for technology, administrative review, document execution, and other legitimate-sounding services. We’ve also been told separately by LPS insiders that LPS and network law firms split the fee for the motion for relief of stay in bankruptcy court, as well as the fee on a small filing called a proof of claim.
What, pray tell, is wrong with this business model? The two suits attack LPS’s very foundations. One case was filed late last week in Federal bankruptcy court in Mississippi and the other in state court in Kentucky. Both make similar allegations, but the Federal case is broader in some respects (it includes a company called Prommis Solutions a firm backed by Great Hill Partners, that like LPS, provides services to foreclosure mills, including one named in this case as defendant along with LPS).
The Kentucky case includes on the RMBS trust issue that we have discussed in this blog. First, it contends that the mortgage assignment attempted by the the local law firm to allow the trust foreclose was a void under New York law, which governs the trust. Hence the foreclosure was invalid. Second, it claims that the defendants (the local law firm and LPS) fabricated documents. Third, the plaintiffs claim that the defendants (LPS and the local law firm) conspired together to practice systemic fraud upon the court and engage fee sharing arrangements, which is tantamount to the unauthorized practice of law (It is illegal for a law firm to split fees with a non-lawyer or to pay a non-lawyer for a referral; it’s considered to be the unauthorized practice of law). And this leads to some very serious conclusions. Per the Kentucky case:
This attempt by the Trust to take Stacy’s real property is most analogous to stealing since this Trust cannot provide any legal evidence of ownership of the promissory note in accordance with the requirements of New York law which governs and controls the actions of the Trust and the Trustee acting on behalf of the trust.
But the real meat in these cases are the class action claims, and they are real doozies. Both allege undisclosed contractual arrangements for impermissible legal fee splittings, which are camouflaged as various types of fees we described earlier. The suits describe the considerable lengths that LPS has gone to to keep these illegal kickbacks secret, including requiring that all attorneys who join the network keep the arrangement confidential. as well as using dubious “trade secret” claims to forestall their disclosure in discovery.
As bad as this fact pattern is, it has even more serious implications for the bankruptcy court filing in Mississippi. In a bankruptcy case, any attorney pleading before the court must disclose every disbursement pursuant to a case, no matter how minor. Yet the payment of fees to LPS have never been disclosed to a single bankruptcy judge in the US, since LPS requires they be kept confidential. LPS and its network lawyers are thus engaged in a massive, ongoing fraud on all bankruptcy courts in the US.
The Prommis Solutions/Great Hill charges are included only in the Mississippi case. Prommis is broadly in the same business as LPS’s Default Services unit (“leading provider of technology-enabled processing services for the default resolution sector of the residential mortgage industry”). And Prommis and its investor Great HIll, like LPS, are not a law firms, which means their participation in foreclosure-related legal fees constitutes illegal fee sharing. Prommis filed a registration statement (it planned to go public) this past June. Consider this section from its “Risk Factors” discussion (boldface theirs):
Regulation of the legal profession may constrain the operations of our business, and could impair our ability to provide services to our customers and adversely affect our revenue and results of operations.
Each state has adopted laws, regulations and codes of ethics that grant attorneys licensed by the state the exclusive right to practice law. The practice of law other than by a licensed attorney is referred to as the unauthorized practice of law. What constitutes or defines the boundaries of the “practice of law,” however, is not necessarily clearly established, varies from state to state and depends on authorities such as state law, bar associations, ethics committees and constitutional law formulated by the U.S. Supreme Court. Many states define the practice of law to include the giving of advice and opinions regarding another person’s legal rights, the preparation of legal documents or the preparation of court documents for another person. In addition, all states and the American Bar Association prohibit attorneys from sharing fees for legal services with non-attorneys.
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.
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Wow. What an amazing piece of investigative journalism. Extremely well done.
One angle to follow up on may be the institutional ownership of LPS. The current mix of owners doesn’t include any of the bad actors (I checked), but they may show up in the history. By doing the same with the publicly traded ratings agencies, I found that a lot of the “customers” were also powerful shareholders. The NASDAQ site gives a snapshot of current ownership, but you have to dig into historical SEC filings if you want to go beyond last quarter.
I have waited many years for this to be discovered. It’s like digging for treasure the more you dig the more you find. Although in this case it’s going to be the attorneys that find the treasures through “The Sherman Antitrust Act (1890).
LPS/Fidelity has given Lenders so much back in free services it’s no wonder they have captured the Foreclosure Market and all the “click fees” associated with it.
Keep digging!!
Will LPs take the fall while our government effectively provides a bailout to all the banks who are the trustees of the REMICs.
Maybe some folks who stopped paying their mortgage now can keep those homes for free since no one can prove definitely where the note on the home is. Nice.
Of course, we can bank on more bankster bailouts, now a “free” market institution. If our our government were anything other than a naked military kleptocracy by plutocracy, this mess would trigger a massive RICO action by special prosecutors and grand juries, raking in all the banksters and their shysters. But so far it seems, there are no officials, representatives, regulators, or judges with the courage or power to stand up to this criminal racket, including POTUS or SCOTUS—apparently key to this corrupt enterprise.
Worse than this massive, foul sewer backup, there’s even more sludge, much more, clogging the pipeline behind it—20% of all mortgage borrowers! “A Mammoth One in Five Borrowers Will Default”, according to: http://housingstory.net/
“Amherst Securities Group LP, one of the most respected names in mortgage research, has trumpeted an ambitious call-to-government arms in its October mortgage report. ‘The death spiral of lower home prices, more borrowers underwater, higher transition rates (to default), more distressed sales and lower home prices must be arrested.'”
[…]
“The authors, who describe current conditions as leading to ‘an impossible number’ of defaults and one that is “politically unfeasible”, unveil a major arms race of measures to counteract the default tide.”
Let the bailouts and constitutional end runs now begin. Of course we don’t give a sh*t about 11 million people losing their homes. It’s all about the banks. It’ll be interesting to see where all this leads, but for the peasants there is no recovery in the near future.
This may cause foreclosure flippers and investors to shun foreclosures, causing a massive reduction in price from where we are now. Anyone have a crystal ball on this?
All I know is that if the appraisal is ok tomorrow then my house sells for almost 1/2 current county RMV by Oct. 15th and I go looking in this environment….should be interesting. I should be in good position as a cash buyer but my selection of fixers’ in my price range may be severely limited soon if the banks staart jerking properties off the market. I am lucky to be able to stash my stuff at friends while I downsize but I hope it doesn’t take too long.
To your question, I am of the opinion that housing prices will fall from 10 – 30 % more depending on location over the next year or so before stabilizing. I was aggressive selling my house with pricing reductions assuming that any overshoot would be lost in another year regardless.
This is not a market for the faint of heart. My impetus is life strategic rather than flipping so am trying to “enjoy” the process…..
Life is what happens to you while you were making other plans…..or some such.
Renting (long term) may be the way to go in this environment. I have been renting truly awersome properties (i. e., beachfront) which a few years ago would have been unaffordable.
Psychoanalystus
I have thought about renting but run a small business out of my house, need a shop, etc. and don’t want restraints around what I can do with the house….I am a sauna addict now as well and will be building another in new house to help with ongoing body rehab.
That Prommis quote is funny. It’s of course bars and law firms themselves who lobby for all those barriers to entry, so that only someone who jumped through a lot of hoops and paid a lot of rents is allowed to “practice law”.
So what does the legal profession think of these unlicensed thugs practicing law? And the bottom-feeder lawyers who collaborate with them?
Or is this a case where they look to the “greater good”, i.e. the interest of the big banks?
I just posted my latest take on this, trying to apply what I’ve learned at Naked Capitalism.
http://attempter.wordpress.com/2010/10/05/the-mers-system-and-the-land-recourse/
Absolutely. Without those barriers to entry, a huge fraction of American law practice would be outsourced to India. You’d need people here in the US of course, but a lot of legal work involves sitting in an office.
A point Dean Baker often makes.
Yves, you write:
“Prommis went public this past June…”
Are you sure of that? While I found various reports that they had filed a registration statement with the SEC for an IPO, I couldn’t any evidence that the offering was completed.
You are right, I saw an IPO filing mentioned in April and again in June, I mistakenly assumed the first was the registration statement filing and the second was the filing of the pricing amendment. Fixed the post.
hum…hum… Our Capitalism System is well and alive for the COLLAPSE…and the corrupted Democracy denial is the “ART” ready to open the doors to our new American Party…COMMUNISM!!! 1880,1895,1917,1938,1952,1956,1965,1968,1972 Communism still today; is a society that puts an end to poverty once and for all, assuring the well being af all its Citizens. It removes the barriers which hampered the development of the productve forces… and makes it possible in time to create the large material and technical basis essential for the achievement of an abundace of the good things of Life.
With all due respect, I think you need to read Orwell’s “Animal Farm” again. While I may agree with the theory (who wouldn’t), reality is rather different.
You may claim that what we have seen in the past is not real Communism, which is probably true, but it definitely was the human face of Communism.
So the ideas are great, but implementation is very bad. Democracy is rather the opposite: a mostly good implementation of a lot of mostly bad ideas, so we end up with “the best government money can buy”.
But I can’t think of a definitely good proposal.
Nope, we’re going straight into fascism, American style if anything.
Am I about to see late night TV pitchmen advising people, for a fee of course, on how to get out from under your mortgage?
I can sure remember they infomercials of the early “oughts” telling me “if you don’t get a house now, you never will” as real estate prices increased in double digits, yoy, for several years in a row.
Looks to me like the same thing on the way down. I can see the pitchman now …. “If you pay your mortgage your a fool. for no money down and five easy payments we can show you how to use the secrets if the Big Banks, and you’ll never have to make a payment again, no mortgage, no car loan, no credit card, no student loan …. they collateralized all that crap and no one holds the note, your scott free”
Looks like a debt jubilee to me.
Welcome to our new readers…
Love that part. Good job.
Ditto on the new readers.
Blockbuster post. Wow….
Keep the heat on Yves. Hopefully the editors of NYT and WAPO are reading to see what real journalism looks like. I smell a Pulitzer.
I second that in all regards!!
Yves, Have you seen the Florida case in which the state AG brought suit against a law firm for foreclosure fraud (basically presenting fraudulent paper to the courts) and was told by Judge Jack S. Cox of the 15th Judicial Circuit that the AG lacked standing to regulate attorney behavior? I am stunned.
http://market-ticker.org/akcs-www?post=168250
http://messages.finance.yahoo.com/Stocks_%28A_to_Z%29/Stocks_L/forumview?bn=80522
Any chances of getting a list of all the law firms that have ‘worked’ with LPS or similar?
Thank you, Yves. You’ve really tracked this well.
The Ticker has a related story on this: “MERS/MBS/Foreclosure Goes RICO”, which includes GMAC, Deutsche Bank, CitiMortgage and others.
http://market-ticker.org/akcs-www?singlepost=2196166
Is this perhaps the tipping point when predators and parasites begin to turn on eachother, giving the people space to reaffirm democracy and the rule of law? Is there any chance the DOJ will take an interest in this?
DOJ?, no way.
Wonder what our stupid little tax cheat, delusional Sec. of Treasury is going to try to do to help these financial types out? Another free blow job?
Remember he asserted that we couldn’t make it without the financial sector? Of course he neglected to mention we can’t make it without the manufacturing sector or the services sector, or the transportation sector, or the police, or the fire fighters or moms & dads or the children.
Having read the class action complaint, i fail to see the evidence that illegal fee splitting took place. LPS charges for technology, administrative review and document execution. They are a data service provider. Are lawyers also manditated to disclose they pay LexisNexis for their data? LPS is a company that has been around for decades. Are we to believe while they were a subsidiary of Fidelity National Information Services the board of directors and lawyers at that company were also openly committing fraud?
In bankruptcy court, every disbursement, even for doughnuts, if it is related to a case has to be disclosed.
Paying for referrals is impermissible. The $150 check that is autodebited at the time the case is kicked over is not going to be hard for a judge to understand.
This is the problem with the extremely one-sided nature of this blog – it’s obvious there’s some good research here, but it’s going to be impossible to have a good grasp on how good a case they have till someone at Volokh or something blogs on the legal merits, which unfortunately often doesn’t happen till the case reaches the appeals stages.
Your “one sided” comment pre supposes I have not weighted the merits of the case. There is other litigation (most notably the RICO action filed yesterday) that is barmy and I’ve flagged its as such (see Links today). So I am not jumping on every anti-servicer news tidbit and thumping it as the real deal. I am focusing on developments I consider to be significant and quite damaging.
I’ve reviewed a good bit of their evidence. The underlying factual support is extensive and persuasive. LPS really does treat the network law firms as arms and legs. The most compelling part is the payment for the referral; the immediacy of the payment is pretty damning. My understanding is that payment for referrals is not kosher, but I am not familiar with the case history here.
Now you are correct that a favorable lower court decision could be overturned, but you imply that would be on the merits of the case and pleadings. Sadly, that can also occur to happenstance, namely getting before a pro-bank judge who is willing to use any thin argument to justify his decision. As you doubtless know well, a lot of legal scholars have taken the Supreme Court to task for the questionable logic of some of their recent decisions. The courts have been increasingly stacked with judges who are inclined to side with the existing institutional structure, rather than adjudicate facts and law as fairly as they can.
“The moment the idea is admitted into society that property is not as sacred as the laws of God, and that there is not a force of law and public justice to protect it, anarchy and tyranny commence. Poperty must be secured or liberty cannot exist.” John Adams.
”the supreme power cannot take away from any man any part of his property without his own consent.” John Locke.
“so great is the regard of law for private property that it will not authorize the least violation of it.” William Blackstone.
“The sacred rights of property are to be guarded at every point. I call them sacred because, if they were unprotected, all other rights become worthless or visionary.” Justice Story.
“No one shall be arbitrarily deprived of his property.” UDHR Article 17
This is not a problem of legal arcana, it’s a breakdown of bedrock social norms.
Do attorneys actually do everything themselves when they prepare legal documents? Do they do their own typing? I’ve worked with plenty of paralegals on preparation of docs for my firm and less so with attorneys. When it comes to getting a home’s title, do you think the attorneys do the title research or someone else, like a paralegal? Perhaps the “preparation of legal documents” refers to an attorney making sure all the documentation is in order, b/c anyone could be sure they didn’t do it all themselves. Perhaps it isn’t in the LPS case, but attorneys proceed anyway, which makes it seem like they should know better.
What about “supervision” don’t you understand? The work is overseen by a professional who is responsible legally. Non-CPAs might also do some scut work on your tax filings, but if you have an accounting firm sign your tax returns as a tax provider, it is the firm that is liable, not the non-CPA. in your example, the paralegal is not liable and not permitted to provide end product directly to the client.
I agree with the direction in which you’re heading-but-one doesn’t have to be licensed to sign a tax return. A better analogy would be for preparing an independent auditor’s report on a set of client financial statements. Non-licensed youngin’s do most of the grunt work. But it would be illegal for a non- CPA to sign the report.
If one of the youngsters missed something big and screws up, and a CPA signs the report, that CPA is the one with a problem. The problem could also extend to CPA subordinates who helped manage and supervise the job. No doubt the firm’s insurance policy would get tagged.
I guess instead of signing the report, the CPA should just “pull the papers together” and then he/she could never get in trouble.
Um, please re-read what I wrote. I did say “accounting firm”. Anything that goes out under a firm’s signature is firm work product. You are right that non-accountants can be tax preparers, but that is a separate matter.
Yves did you not get the memo…pay grade = lack of responsibility…its a dominance issue…I worked hard too get here and damned if some one is going to make me responsible for all that they…that wish they were like me, but got caught out on (did the same but phew)…them’s the breaks…evolution or god said so…Himmler said as such…a Cock is a very nice thing….if its blood is pure (aka dominance).
Will this god awful mess about notes and assignment call into question the ownership of homes in about 30 years when people actually pay off their mortgages?
What do you think about this almost identical case filed against LPS in 2008:
http://4closurefraud.org/2010/03/04/fidelitys-lps-secret-deals-with-mortgage-companies-and-law-firms/
According to housingwire.com, it was later thrown out with prejudice, which seems very odd:
http://www.housingwire.com/2008/12/03/lps-sees-fee-splitting-lawsuit-dismissed
Thanks for any insight.
A fruitless half hour of browsing the S.D. TX website yielded no copy of the decision in the Harris case. It was apparently not assigned to District Judge Hughes, as suggested by Housing Wire, but instead to Bankruptcy Judge Bohm, although it was an Adversary Proceeding which may have been “removed” to the District Court (i.e., for which the “reference” may have been “withdrawn”). The PACER docket database would yield helpful history, but users must subscribe and pay per-page fees for downloads, and PACER usually does not provide HTML links but only PDF downloads.
4ClosureFraud gave a cite to the complaint when it was filed as follows:
Harris v. Fidelity National Information Services (In re Harris), Case No. 03-44826-H4-13
See http://4closurefraud.org/2010/03/04/fidelitys-lps-secret-deals-with-mortgage-companies-and-law-firms/
Apologies for omission of HTML code.
I’ve spent a lot of time with the attorneys who made this filing. Suffice it to say they have a tremendous amount of information they have developed on the internal operations of LPS, including a real smoking gun. The allegations in the filing itself are far more specific and detailed than in the prior case. They may sound similar in thrust, but they differ considerably in the nature and detail of the underlying argument, particularly in the amount of factual support they provide in the claim in the relationship between LPS and its network law firms. LPS is certain, however, to contend to shareholders that the the resemblance between this and the earlier lawsuit is high.
Nothing in litigation is 100%, but the odds this survives summary judgment are very high, and they know where to go in discovery to find the dead bodies.
Scribd is nearly useless in my Firefox. I can’t wait to see PDFs of the pleadings. If you will give us the civil action number(s), I can retrieve the PDFs from PACER.
Apologies also for not simply emailing this to you but I could not find an address.
never mind. I see the MS case is Civ. No. 09-11763-DWH (Bankr. N.D. MS), In re Thorne; KY case is Wells Fargo, et al. v. Stacy, Civ. No. 08-CI-120 (Bourbon Circuit Court [sic], KY).
That’s kinda funny, Yves….c’mon.
Just how many attempted class actions have you filed or defended, personally? “..the odds this survives summary judgment are very high…”? Says who? The person that admits they have spent extensive time with plaintiffs’ bar on this?
I don’t have a dog in the fight….but I think you’d have to admit that your claims here are reaching, since you don’t practice law in either state.
That said, most class claims through every bit of shit on the wall they can, in an effort to see if anything sticks — often including claims for causes of action that aren’t actually recognized by the court.
That said, both of these cases were filed in jurisdictions known for being class-friendly, BTW. You can essentially get a drive-thru certification, Mickey D’s style, in MS courts, but I doubt either case stays there. You’ll see both remanded to a federal court, a more proper venue for the claims here. And it’s much tougher to certify a class in a federal venue, as any attorney who’s tried class actions will tell you.
Beyond that, you glossed over the Harris case. For the benefit of other readers that spent their time searching for information, there isn’t a decision in the case, as some had claimed — because it was dismissed on a motion to dismiss filed by the plaintiff (i.e., no ruling). But because this case was dismissed with prejudice, the implication here is that any summary judgment that might have been coming down from the bench wouldn’t have been in the Harris’ favor. Prior to the motion to dismiss, a look at the court records show that LPS had taken a so-called 12b6 approach to defending most of its claims — also common, this approach means “okay, even assuming this claim is true, there is no standing to make this claim to the court.” You’ll see plenty of the same in both of these cases, too.
I’m not suggesting the cases don’t have merit. They may. But that’s something we’ll only know as we watch both unfold in slow motion over the next few months, and breathlessly proclaiming that the case is decided before it really has ever begun strikes me as EXACTLY the sort of shit that this blog once railed against the mainstream press for doing.
It’s a shame to think this blog has become a caricature of itself.
If this isn’t a case of what psychologists call projection, I don’t know what is. You accuse me of being out of my depth, yet your comments reveal considerable ignorance.
Funny, for someone who claims to be an attorney, you don’t seem able to read. If you had bothered reading the post, or looking at the claims, you’d see the Mississippi case was a bankruptcy court case. Bankruptcy court is Federal, the very first line on ScribD reads: “in the United States Bankruptcy Court”
Second, you don’t remand a case that originated in state court to Federal. “Remand” means return. You “remove” it.
And again if you knew what you were talking about, you’d know the Kentucky case, the only state court case here, can’t be removed to Federal court. Only the defendant can ask to have a case removed. This case is a counter-claim. The party filing this action IS the defendant.
Third, for this case to get class certification, you need to get a class action firm signed up to demonstrate adequacy of representation. If you had bothered looking at Martindale Hubble, you’d see the firms are local guys, I know which firms joining for the class certification and they are big deal motherfuckers. They would not get involved if they didn’t think it had merit.
Fourth, I have reviewed the claims and their underlying evidence. The have considerable evidence in hand, pre discovery. They can show the court that there are issues of fact here, which is the basis for getting past summary judgment. And yes, I’ve compared the claims to Harris, while you spout off having read absolutely nothing.
Fifth, people who are independent and read the case (and unlike you, are real Federal litigators) give it a positive first reading:
I admire the strategy being used by the homeowners’ counsel. One case in federal court, the other in state court. One case destined for the old 5th Circuit, the other destined for a state court of last resort in a different circuit. Not exactly a circuit-conflict strategy, but carefully planned to improve chances of review by the Supreme Court of the United States if necessary.
It appears a motion for relief from stay was filed by the putative note-holder in both cases, which was granted but then set aside in the KY case (not clear what action was taken on that motion in the MS case). But the class definitions are slightly different (with a subclass averment in the KY case). A previous decision on point against an entity similar to LPS in one jurisdiction (MS) is icing on the cake.”
So if you are a lawyer, you are incompetent or lazy. Your comments hew closely to talking points from the LPS conference call yesterday.
It is likely you are a shill for LPS claiming to be an attorney. And they aren’t very competent either. The reading I got from several institutional investors is that the LPS PR damage control campaign is one of the worst they’ve ever seen.
That would be my worry. In fact if I had a mortgage, I wouldn’t wait 30 years – I would be asking right now whether the entity to whom I was making payments was legally entitled to receive them. It seems like it would be quite possible for a third party to appear on the scene and demand payments – for example, the actual holder of the note (or the holder’s creditors if the holder is in bankruptcy).
Is there any way to estimate how much these lawsuits, and any pullback in LPS-facilitated foreclosures, could affect the housing market overall? I looked at the LPS 2009 annual report and there is no quantitative information on how many foreclosures went through their default management services. The AR does say default management took in over $1bn in revenue, which sounds like it could be hundreds of thousands of foreclosures. So my guess is that if LPS freezes some of their processes, following Ally, JPMorgan, and BofA, it could have a major effect on the foreclosure rate overall.
LPS discloses in presentations that they had 21% market share of default in 2009. At conferences, mgmt says the market share is higher in pre-FC (~30%) than post-FC (~10%), but the revs are about 50/50 split between the two.
I think those market shares are based on revenue, not volume. In terms of volume, RealtyTrac has fresh NOD/LIS (think this equates to pre-FC) running at ~300K/quarter, give or take, for the past few quarters, and Q3 appears to track that based on July and August figures.
> POSTING ARTICLE by Rick Grant from HousingWire
Tuesday, October 5th, 2010, 11:25 am
For much of my career as a reporter covering the mortgage lending business, I have focused on technology and its promise of making things better, cheaper or faster. Sometimes, a tool can deliver more than one of these. Rarely have I seen one that delivers all three.
During the housing boom that started us on our journey into the new century, mortgage originators were happy to see any one of these promises fulfilled. Historically low interest rates, a vast array of mortgage loan product to meet any conceivable borrower’s need and a federal mandate to increase home ownership had lenders attempting to respond to an avalanche of new business. They couldn’t keep up and needed technology to do so.
It wasn’t just technology, of course, that finally allowed the industry to meet the market need for home loans, there was a fair amount of process improvement that played into that as well. Sadly, the tools and processes that empowered companies to put so many Americans into their own homes during the boom are now being called into question by attorneys who are fighting the foreclosure process.
The same borrower who could not have cared less who signed on the dotted line in order to make the loan closing happen in time to avoid inconvenience suddenly is shocked and dismayed to learn that they don’t recognize a signature on one of the documents in their closing package.
Is it possible, they and their attorneys wonder, that this person wasn’t intimately involved in the loan closing and may not have known all the details of the deal? Doesn’t this mean that the gentle borrower should get to live in his home for the rest of his life without every paying back a penny on the note?
Is this seriously a question that we’re asking ourselves? Of course you have to pay back the loan. Either that or vacate the property. The fact that you’ve been living in the house for all of this time should be plenty of evidence that you intended to enter into the mortgage agreement, whether every i was dotted and t crossed or not. But perhaps I think that because I’m still paying my mortgage loan as agreed.
We probably should have expected this, I suppose. In hindsight, it makes perfect sense that the downturn following the most phenomenal, incredible and in all other ways totally remarkable housing boom in history would also be one of biblical proportions. Did we really expect all of those folks who suddenly found themselves in possession of an American Dream they had been taught to desire would just retreat back into the rental market without a fuss when the bubble burst?
I think the typical thought process went more like: “(1) they’re telling me to sell these crazy loan products; seems stupid, but pays great; (2) I’ll be so long gone before any of this goes bad; and (3) I get paid promptly. No-brainer. Sign here. Or don’t and we’ll just get someone to sign it for you later.”
Getting past all the noise about who’s to blame for what — which bores me to no end given that the people who really scored big aren’t even on the field of play anymore — we’re ready to start fixing this problem. Unfortunately, we’re operating in the U.S. home finance industry, the business no legislator seems to have the time to really understand but that every regulator feels honor bound to write a rule about.
So, now we find ourselves in the wake of a scandal at a major servicing house where some serious corner-cutting has called our entire foreclosure process into question and the industry’s response has been to fall back into a defense position and freeze everything. If they don’t, the plaintiff’s bar will descend on them like a guillotine blade and that’ll be the end of it. The foreclosure process, the built in purge process for bad loans, is stalled again.
Who wins? For starters, about 10% of U.S. mortgage borrowers who now have a roof over their heads for free, at least for the time being. A few attorneys who serve this population who now have some real evangelists as clients who will send them additional criminal cases as they crop up (I don’t see how there can be much money to be made in working for someone who honestly can’t afford to pay his mortgage, so I figure it must be a marketing ploy). Some politicians who will earn media coverage by shaking a fist at the industry and acting like they’re standing up for all homeowners, when really they are defending a small percentage of those who are taking advantage of the rest of us with the help of some clever attorneys.
Everyone else loses. Everyone.
Am I missing something here? Readers of this column have not been shy about writing to me when they disagreed with something I’ve said. I hope I’ll hear from someone who can tell me that I’m missing a big piece of this story because, honestly, this is the stupidest thing I’ve ever seen.
Rick Grant is veteran journalist covering mortgage technology and the financial industry.
Those 10% “free roof” people have crushed credit. They’re not “getting away” with much of anything. I would have to say that if the guy has really covered the business, and was unaware of what happened, then he’s very clueless, but it’s more likely that he knew all about it and said little to nothing:
http://www.foxnews.com/story/0,2933,460044,00.html
Am I missing something here? Splendid
The crooked nature of our new-money-for-debt (fractional reserve lending) system?
The banks create new money from nothing and exchange it for an IOU to repay the principal and the interest which in aggregate DOES NOT EVEN EXIST in principle (no pun intended).
The fractional reserve banks knew they were blowing a bubble since that is what they do for a living. Am I happy that some folks may reap a housing bonanza because the mortgage industry screwed up? Yes, because otherwise the deflation will be that much worse. 97% of our money supply is debt; the less that is repaid then the better off the economy is SINCE THE BANKS AREN’T LENDING.
I seriously wish everyone who can (see you lawyer first) would default on their mortgage. It would be a form of self administered Jubilee and would save US from depression.
Everyone loses? You just said homeowners get to stay in their homes. Imagine the alternative is being on the street. You seem to discount the huge number of people involved in this situation. 10% is a huge number of people.
Your other premise is false. Technology was used all the way through the process, origination, securitization, and all the near control fraud that followed. At the broker level, the intense demand from Investment Banks translated into completely eliminating the need to even consider risk.
When this outrageousness crashed, they were protected.
Automatic Underwriting software allowed loans to close that the hapless borrower had no idea was essentially set up to fail. The Banks have continued to win on the backs of taxpayers. Their bailouts were a loss to everybody, everybody lost money that could have gone into the economy and undoubtely help people pay their mortgages. I can’t imagine people will be writing after your snide attempt to blame borrowers, the fact that no one is going to jail is one of the stupidest things I’ve ever seen.
The ETHER (BS) is so strong these days…no wonder every one is so high…they can’t tell a match has been struck and they are on fire.
The big CB/IB/FED/Central Bank financiers signed off on this dreck ages ago (nothing in this world is beyond their gaze, they get first cut in *all things* as creationist gods of value). Having multiple layers of deniability aided and abetted by a bought and payed for state and federal governments including their respective judicature…making them untouchable. Now they stand at the end of dark hallways, waiting…too push out those naive enough to think they were in pat, to be thrust into the *Commons Lobby* discoveries light illuminating their criminal nakedness. A paltry feast to satisfy the mob is on the menu and if the commons order loudly, strongly enough it will be served, sedating hungers pangs and then a digestive rest will take angers place…the Commons default position.
This legal process will take years and is stacked against the Commons, parlor tricks to dilute / diffuse energy and *IF* the Commons receive not unlike Exxon Valdez or Enron cases some punitive judgement in its favor, it will be a case of…too little too late affair. Give hope and dash it upon the rocks of reality of the two tier world…rinse and repeat ad infinity.
In the Randian / neoliberal world of the Ownership Society exported under the pretence of *Individual Freedom* around this globe, one must remember everything is under a note of credit / title, land, houses, companies, banks, governments, judicature, religion, myself (as exhibited by my credit rating…the tool by which *they value_judge_* my humanity in their system), even my children are all property to those that create value (now out of nothing) and trade of it and rule by it, by any other name they call it save what it really is…enforced slavery.
Skippy…land / housing titles…bah…try getting free and clear unclouded title on yourself first…start by not voting ever again, till they have to come to the table face to face, then and only then…a contract can be hammered out. Until then we are but a form of mobile slaves unable to do much more than enrich the few for their pleasure, one of which is your sons and daughters servitude.
PS…until the Commons shows its ready to give back all the trinkets they are allowed to play with (for a time and with interest), the illusion of status, wealth, law, governance in the name of the people, by the people, and for the people, to demand a place at the decision making table *ON* equal terms with the *creators of value*, the slavery will continue..two tier world. Time to man up…get your ancestor on…humanitze your self…for the end game… for this world_as it is_ is fast becoming an over crowded American prison…where the only classes that exist are…BITCHES…BULLS…GUARDS…WARDENS…THE SYSTEMS INVESTORS and lastly the BOND HOLDERS (untouchables) that matter most…by their bequeath and unanswerable too any…even their God’s or other Ideology as they were created to_rule_ *buy* and for them.
….they were created to_rule_*buy* and for the Commons as it is self evident..power is only gifted too the superior individual…by ether deities or evolution eh (cough they call it hard work {work harder slaves memo})…a world ruled by self indulgent psychopaths that with every success reinforce their delusions of grandeur aided by the all too willing…cop ride on their coat tails to elevate their defective wants.
Humanity is at the wall like never before (the house is full), every action has a equal and opposite reaction (this is indisputable), yet more of the same..nay Super Size it…is the answer to our dilemma.
The funny thing is…mass and volume are correlations (see value = mass) finite mass expanded only serves to diffuse its representation in any given volume, there by decreasing its value relative its original mass to volume ratio…subject to the laws of gravity have we reached escape velocity (see Exchanges ie American Dow/S&P/Nasdaq + global)? Humanity’s masters are ready to enforce a possible ELE (bees, biodiversity, toxicafation of the biosphere etc and for what[?] exchange price all ways going up?????[WTF] The template of MSM advertising insertion from our very birth…setting the standards of how we must live…and we laugh at our ancestors beliefs before the God of Abraham et al (how will we be judged by our ancestors…if they have life to even to take on such a endeavor).
So consumed (consumer) for today and not a thought about tomorrow…yet we fear lifestyle reduction (see MSM advertising template) to the further reduction of our species (forget all others they don’t matter…its a lifestyle thingy).
In ending as the aboriginals found out over 40 odd thousand years here down under…we are born of the land and not to rule it. It controls our destiny not we…until we respect it, it will not respect us. All other machinations are secondary too it. Humanity is approaching a state of no return, a self inflicted extinction event (study hobby to a few) and we will take as many with us just to prove our greatness..barf.
How about everything that makes up this planet having a vote…eh…as most of it was here before we strode upon it…worked hard to live / exist only to be introduced to human slavery…our optics are very short sighted eh…en fin.
Rick Grant is full of it.
I have yet to hear him complain about disinterested intermediaries – who have been paid several times over on these sorts of transactions – greedily splitting up foreclosed property to churn out more fraudulent paper and fees.
And many of the investors were already paid off by YOU – the taxpayer – via AIG, Fed purchases of MBS, and similar bailout nonsense.
99% of the rest of the population basically gets to “suck it up”, by footing the bill for all this BS, losing their property, and thereby losing their rights.
This is the depths of hell to which we’ve descended.
Talking about “free houses” is only a distraction served up by the elites of the industry to keep YOU the taxpayer in perpetual serfdom and ignorance. Don’t listen to these people; like any other debt collector, they want you to feel shame and guilt so that you’ll never assert your rights.
Wake up America. It’s time to put your foot down.
Well said…the architects of this debacle should be on the hot seat…not the uninformed.
Yves
Did you read today’s New York Times. Last Sept 29th the Senate passed a new law allowing notarizations, including electronic notarizations, from any state to be accepted nationwide.
http://www.nytimes.com/2010/10/06/business/06mortgage.html?hpw
I’m sure the timing is coincidental
Funny that LPS should be called a “servicer” It doesn’t service the law firms, it controls them. The law firm simply becomes one more cog in the foreclosure mill.
That should get a lot of attorneys in trouble, they have basically sold out on their obligation to be an “officer of the court” and not be a party to fraud.