Lender Processing Services Produced More Bogus Foreclosure Documents Than It ‘Fessed To

Readers may recall that this site broke the story of litigation against Lender Processing Services, the biggest player in foreclosure management on behalf of mortgage servicers. These cases, launched earlier in the fall, accused the company of taking impermissible legal fees. These class action lawsuits were joined by the US bankruptcy trustee for the Northern District of Mississippi, both for herself and on behalf of all US bankruptcy fees, which meant she felt the issues set forth in the case had merit and were serious. In November, an additional class action case was filed against LPS, this time securities litigation, charging the company with making false and misleading statements to investors from July 29, 2009 to October 4, 2010, including “deceptive and improper document execution and preparation related to foreclosure proceedings.”

Subsequently, as our Richard Smith detailed earlier today, Housing Wire’s Paul Jackson attacked critics of LPS, including this blogger, of going off half baked in accusing the company of engaging in document fabrication. A Reuters investigation published today supports the critics’s case, revealing that document creation was far more extensive that the company has suggested.

From Reuters (hat tip April Charney):

Public records reveal that the company’s LPS Default Solutions unit produced documents of dubious authenticity in far larger quantities than it has disclosed, and over a much longer timespan.

Questionable signing and notarization practices weren’t limited to its subsidiary, called DocX, but occurred in at least one of LPS’s own offices, mortgage assignments filed in county recorders’ offices show. And rather than halt such practices after the federal investigation got underway, the company shifted the signing to firms with which it has close business ties. LPS provided personnel to work in the new signing operations, according to information from an LPS spokeswoman and court records including an October 21 ruling by a judge in Brooklyn, New York. Records in county recorders’ offices, and in the judge’s opinion, show that “robosigning” and preparation of apparently false documents went on at these sites on a large scale…

The criminal investigation in Jacksonville by federal prosecutors and the Federal Bureau of Investigation is intensifying. The same goes for a separate inquiry by the Florida attorney general’s office. Individuals with direct knowledge of the federal inquiry said that prosecutors have impaneled a grand jury, begun calling witnesses and subpoenaed records from LPS…

The U.S. Comptroller of the Currency’s office, which is responsible for supervising national banks, also announced in November that it had teamed up with the Federal Reserve to conduct an on-site examination of LPS…

Meanwhile, the threats from four class action lawsuits filed in federal courts appear to be greater than the company has indicated, especially one filed in Mississippi. In a highly unusual move, a unit of the U.S. Justice Department has joined that suit as a plaintiff. The lawsuit alleges that LPS extracted many millions of dollars in kickbacks from law firms through an illegal fee-sharing arrangement, in exchange for doling out lucrative foreclosure work to them.

Note the Reuters story confirms, with almost all of the details reported here, the practices we discussed in a post more than two months ago: how LPS pushed the foreclosure mills in its network to foreclose on a very strict timetable, by threatening to terminate the large flow of foreclosure litigation it directed to them if they did not perform as specified.

The story also indicates that DocX, the LPS subsidiary that not only engaged in robo signing (one perp is the now notorious Linda Greene) and filing of other questionable documents continued to operate far longer than LPS had earlier claimed (LPS maintains that the bad practices had ceased, but given its continued strained relationship with the truth, I’m not certain I’d take these denials at face value).

The article suggests that the some of questionable activities extended beyond DocX, which raises the possibility that, just as robo signing was moved into network foreclosure mill firms, other improper practices may simply have been shifted elsewhere in LPS or to its law firm arms and legs:

Hundreds of public records examined by Reuters show that production of suspect mortgage assignments was not limited to DocX.

The records indicate that employees in one of LPS’s own offices, in Mendota Heights, Minnesota, signed and notarized large numbers of documents which for multiple reasons appear invalid. Records filed with county recorders’ offices show that the Minnesota office continued to turn out these documents at least through the end of January 2010.

Dozens of assignments were signed by LPS Minnesota office employees who listed themselves as corporate officers of banks and other loan servicers, a sampling of public records from counties in five states shows. As at DocX, the assignments were signed years after the mortgages should have been transferred to the investment trusts…

Equally difficult to explain are mortgage assignments signed by LPS Minnesota employees purporting to be officers of lenders that no longer existed. For example, in January 2010, two Minnesota employees jointly signed one as officers of Encore Credit Corp., defunct since 2008.

It’s good to see the mainstream media start to take charges against foreclosure miscreants seriously, even if against a solo, if important actor. We’ll know a see change has taken place when we see similar detailed reporting on the “improprieties” of a TBTF bank.

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  1. ScottS

    It does beg the question of whether or not LPS will roll over on the TBTF banks. So begins the game of Prisoner’s Dilemma.

    That assumes anyone is investigating this.

  2. Funny Joke

    The OCC did such a wonderful job with subprime lenders. Here they come now with the Fed, to get to the bottom of LPS.

  3. Another victim of a Housing Wire hatchet job

    It appears the main stream media, unlike Housing Wire, is going to stop using the industry talking points as the basis of its reporting.

    That is a very positive step towards resolution of the problems underlying the credit crisis.

  4. Fractal

    Yves, this line right here from the Reuters link is the reason why the FBI smells blood:

    “And rather than halt such practices after the federal investigation got underway, the company shifted the signing to firms with which it has close business ties.”

    LPS is literally “shifty.” That’s what makes the hair rise on the backs of detectives’ necks, even when they’re not on teevee. “These guys know what they are doing is bogus, they know we are on to them, and still they are trying to hide it.”

    The gumshoes will track these gangsters down, no doubt about it. This pattern of shifting operations shows their guilty knowledge. They behave exactly like money launderers. In fact, a good way to think of the criminal side of this conspiracy is to think of mortgage processors as money launderers for bad mortgage notes. They are trying to clean up the notes using every illegal trick in the book, including closing down shop the minute the feds are onto them and opening up new shops in other jurisdictions or under other names. Classic!

    1. SidFinster

      My guess is that the FBI will either bring some token charges which result in mild plea bargains, or the Feds will do nothing.

      The FBI track record in prosecuting financial crimes has not exactly been impressive. Inaction seems to be the preferred course of action, until thing get so bad that they can no longer be ignored (cf. Madoff, B.)

  5. Barbara Ann Jackson

    Foreclosure lawyers are officers of the court knowledge of applicable laws and civil procedure is not required from mortgage lenders, nor loan servicers. In states that require judicial foreclosures, FORECLOSURE LAWYERS are the ones who file lawsuits to seize and sell property; and lawyers are responsible for filing and recording foreclosure property deeds.

    Inadequate or questionable foreclosure can lead to useless property deeds that impede real estate sales. Increasing numbers of title insurance companies are refusing to cover foreclosed properties; and certain mortgage default claims, are being denied because of defective foreclosure proceedings. . .”

    SEE: Request for Congressional Foreclosure Panel to Examine Foreclosure Lawyers @ http://www.change.org/petitions/view/request_for_congressional_foreclosure_panel_to_examine_foreclosure_lawyers#

    1. Fractal

      Is there new material at the link? Is that petition a recent campaign?

      You imply that the lawyers are primarily responsible; we might agree with you but their primary responsibility does not excuse the criminal fraud and note laundering committed by the robosigners.

      For details on just how deeply mired in shit the foreclosure mill law firms are, read the bottom half of the Reuters item Yves linked to. There is substantial evidence that the law firms are in fact conspiring with LPS to violate real property laws, criminal laws, court procedural rules, rules of professional conduct and ethics decisions by state bar associations. The foreclosure mills and LPS work hand-in-glove to launder crappy mortgage notes. They are jointly guilty and will go down together.

      1. AR

        I think it might be best to try to turn a few foreclosure mill lawyers on LPS.

        From the article:

        “The “LPS Desktop” starts foreclosure actions, assigns work to law firms and supervises the cases to conclusion with almost no intervention by humans.“


        “In written answers to questions, LPS spokeswoman Kersch didn’t respond directly to questions about the employees signing mortgage assignments after the foreclosures had been filed, or about signing on behalf of defunct companies. Instead, she said that the LPS employees signed mortgage assignments because lawyers who had filed foreclosure cases asked them to.

  6. Fractal

    Yves has posited the likely cluster-frack that will result from fraudulent mortgage note assignments, including the possibility of multiple fraudulent claims on the same note, leading to multiple foreclosure attempts on the same property by different lenders or different securitization trusts.

    How about this one? Due to screwups by the Stern law firm in FL, the same house was SOLD TWICE at virtually the same time to two different buyers. Not caused by screwed up notes, but probably caused by LPS’s pressure on its foreclosure mill law firms to foreclose-as-fast-as-possible.


  7. circle jerk

    You think these guys are alone?…Do you really think their is a rule of law?…Everything is a joke….there is so much grey area…that it would give a thinking person pause…but with all the concerns with bailouts to conflicts of interest…has it slowed the untouchables down?

    CBS Allows Fed to Spread Disinformation Unchallenged

    When it came to sub-prime loans, Bernanke said, “One of the things I most regret is that we weren’t strong enough in putting in consumer protections to try to cut down on the subprime lending problem. That’s an area where I think we could have done more.” The Fed wants to protect consumers? Is that why the Fed is trying to make it harder for consumers to stop foreclosures? McClatchy.com reported last week, “As Americans continue to lose their homes in record numbers, the Federal Reserve is considering making it much harder for homeowners to stop foreclosures and escape predatory home loans with onerous terms. The Fed’s proposal to amend a 42-year-old provision of the federal Truth in Lending Act has angered labor, civil rights and consumer advocacy groups along with a slew of foreclosure defense attorneys.” (Click here for the complete story from McClatchy.com.) Why didn’t 60 catch this obvious piece of BS?

    The 60 Minutes story was more of a government information video than honest journalism. Not exploring Mr. Bernanke’s dismal track record is “too stupid to be stupid.” Shame on 60 Minutes for masquerading as a news program and allowing disinformation and bad calls to go unquestioned and unchallenged.


    1. Fractal

      good to call bullshit on the Fed for attempting to repeal some obscure but critical provision of the Truth in Lending Act (TILA) affecting homebuyers’ ability to rescind a purchase. Have not researched the law on that, but it is clearly a BS move by the Fed and possibly one that will be hard or impossible to stop without explicit legislation enshrining the settled understanding of rescission rights into statute.

  8. wendell


    I am a lawyer, but this is a country mile from my area of practice. Nevertheless, I have some sort of sense memory of real property law from class and the bar exam.

    Am I missing something major–or, as I’ve been thinking, doesn’t this clusterf^*# cloud the title not just of foreclosed properties, but EVERY mortgaged property where the mortgage was securitized? How can anyone know, with certainty, that the proper party is, upon closing, being paid off–and that some other party in the chain won’t come along later, claiming that they, not the party paid off, should have been paid off? I know that is normally the role of title insurance–but, at this point, how can one have faith in them either?

    I have a mortgage, totally current, with GMAC/Ally as the servicer. The note (I’ve used the SEIU’s Show Me the Note website) is with Fannie. The Lord may know what really happened in between; I’m increasingly skeptical that anyone else does.

    Have your real estate/trust lawyer contacts ever addressed this point?

    1. AR

      Yves, as well as O. Max Gardner III, and Adam Levitin have addressed the issue of chain of title numerous times. Here are some links to get you started:






    2. AR

      Yves, as well as O. Max Gardner III, and Adam Levitin have addressed the issue of chain of title numerous times.

      Wendell, I tried to post a reply, filled with links to earlier posts by Yves, as well as links to Adam Levitin and O. Max Gardner III, at CreditSlips.org, but I think the spam filter detected too many links and rejected the comment. So you’ll have to find them yourself.

      Also, click on the ‘real estate’ tag at the bottom of Yves’ text above, and do a search for the posts from the last three or so months that include the term ‘chain of title’.

      1. wendell


        Thanks–but almost all of the commentary, including most if not all of Yves’ entries here at NC, has been in the securitized mortgage/foreclosure context. What I’m trying to focus on is whether the problem is far broader–similarly contaminating transfers of property where there are securitized mortgages that are current, but not paid off when the next sale of the property occurs. Off-hand, I can’t see a distinction. The crappy, heedless, improper transfers that seem to have endemic to the securtization process would, seemingly, create all the same problems that the foreclosure cases present–just without a plaintiff claiming the property, or a second payoff YET. THAT’S what I’m trying to get at.

        1. AR

          In the discussions that had initiated here concerning foreclosure, it has been the consensus that all securitized mortgage titles are similarly affected, even if you have never missed a payment, and are current. It’s the securitization that could cloud your title, if MERS is involved.

          You need, first, to determine if your loan has a MERS MIN (mortgage identification number) and is still registered in MERS. I don’t have the link but you can go to MERS’ site and inquire, Maybe someone else here will provide that link. Fannie securitizes most of its loans, and is a member of MERS.

          1. Cedric Regula

            Seems to me if it didn’t get transferred thru the whole securitization chain, with endorsements, all the way to the trusts, it still could get messed up even tho they didn’t use MERS.

            There is still the issue about whether endorsement “in blank” is kosher, and usually someone is interested in registering transactions with the county if MERS wasn’t used so maybe it can be a problem or maybe not. I get confused.

            Then I think I read something about some small originator that went under and was pledging them as collateral for loans, but they theoretically also went to the trust fund in a securitization deal. Must have something to do with the money multiplier. That confuses me too.

          2. Skippy

            @Cedric Regula

            Cough…@ ALL securitized debt.

            We *now* $know$ what comes out the other side of a debt black hole…”fraudulent money multiplier”. Know wonder the neocons wanted de-regulation eh…GINspan and BANKake need fraud…its the new bedrock of the monetary house.

      2. Cedric Regula

        I have been been following the issues here for quite a while, but I have a similar question that I haven’t been able to square in my mind.

        I’ve read how chain of title gets discombobulated, title insurance companies are discomforted with the notion of disgorgement of funds if they goof and don’t find the errors before close of escrow, and this could in fact happen in a foreclosure or normal sale.

        But then I’ve also many times read the comment that “state law on foreclosures is very final”, or something like that, which means if it closes, it is a done deal, and presumably it would not be your problem if you paid off the wrong guy, technically or otherwise.

        Since I’m not any kind of lawyer, I was wondering if anyone could straighten me out on that and save me the trouble of becoming a lawyer?

          1. Cedric Regula

            OK. The Finality of Foreclosure article explains how a buyer is protected from future claims from the foreclosured party over improper foreclosure. So covered there.

            But where things are wide open in a standard sale or foreclosure sale is the possibility of the “true note holder” showing up after you paid off some complete stranger.

            Scroll down thru the comments and see the question by “Econolicious”.

            The title insurance is supposed to cover this I think, but it would be good to read the T’s&C’s to be sure about that.

          2. wendell


            Thanks. I guess the bottom line is that, unless and until things clear up, a prudent person would make sure to hire a top-flight real estate lawyer for even a seemingly routine purchase or sale of any real estate.

            Back in 2006-2007, when the bubble was bursting, who ever thought that there would be ensuing clouds over nearly every title?

    3. ChrisPacific

      You have to get into the comments on the relevant posts to see that kind of thing. Lots of anecdotal evidence from people that asked the same question you did, started digging and found the results weren’t pretty. There’s perhaps a bit of selection bias at work with people choosing not to post if everything was kosher, but still there is plenty of evidence that your suspicion is justified in many cases.

      See for example the comment by Tom Bokuniewicz on this post:


  9. AR

    At the end of the article Paltrow quotes from (now retired) Judge Diane Weiss Sigmund, from p.32 of In Re Niles C. Taylor and Angela J. Taylor. Sigmund gives a detailed description of how LPS’ operations work in the decision.


    Also note that Wells’ servicer AHMS is mentioned umpteen times in the article, in relation to LPS setting up robosigners there, ‘nearby’. In the current Time article ‘The Case of the Missing Mortgage’, Stephen Gandel traces the subject lost mortgage to a Wells warehouse described as 5 miles east of Minneapolis, which just happens to also describe the location of LPS, in Mendota Heights. Of course the entity attempting to foreclose on this mortgage was not Wells, but GSAMP 2005-HE3.

    1. f247

      Why do you refer to AHMSI as “Wells’ servicer”? I think AHMSI is owned by Wilbur Ross (roll-up of American Home Mortgage and Option One servicing ops).


      Do they service a lot of WFC pools? It might be true, I had just never heard that sort of specific association. I know AHMSI made a huge servicing purchase from Citi in early ’09 (thought this was a lot of legacy Argent loans).

      On the WFC warehouse issue, you also have to remember the Norwest merger that created the current Wells Fargo. Norwest was based out of Minneapolis, so it might makes sense that there were legacy ops there.

      And, no, I’m not “defending servicers”, just making sure I have my facts straight.

      1. AR

        America’s Servicing Company is Wells’ servicer

        AHMS services some Wells mortgages, but I didn’t intend to imply that it was owned by Wells.

        1. f247

          Thanks for the Time article. I had not read. Surprising that it was so easy for the author/BofA to track down the paper.

  10. Tertium Squid

    Yves, this might be worth a chuckle & sigh. About a house that’s been in foreclosure for 25 years.


    Not so informative, but the way the lender’s lawyer whines about having to actually practice law is priceless. If only her arguments had no merit, then they could be disregarded. What a sense of entitlement. Fnur fnur.


    “Mr. Summers, the lawyer for the lender, calls the case “the foreclosure from hell.” He says Ms. Campbell has appealed the case seven times since he took it on in 2000, and all of her arguments are just stalling tactics.

    “It’s almost like clockwork. You know you’re going to get another three-inch stack of documents every month or so, and you have to take the time to read through it,” Mr. Summers says. “That is a burden on the courts, a burden on lawyers to decipher it, and it has enough meat in it that it’s not all void.”

    For example, according to Mr. Summers and to court filings, in 2007, when a judge remanded the case to the trial court, a court clerk failed to issue a mandate establishing the lower court’s jurisdiction. Ms. Campbell appealed the case on those grounds.”

    1. Tertium Squid

      Bonus commentary from the article’s author, who is doing her no favors:

      “She has managed to stave off the banks partly because several courts have recognized that some of her legal arguments have some merit—however minor. Two foreclosure actions against her, for example, were thrown out because her lender sat on its hands too long after filing a case and lost its window to foreclose.”

      “…some of her legal merits have merit-however minor” is a magnificent phrase. Reminds me of Homer Simpson: With facts you can prove anything that’s even remotely true!

  11. razzz

    Okay, let’s say you paid the mortgage off exacting finality as reward besides the lower in value property, along comes Susan looking for repayment (found the note). Property is out of the picture but personal and corporate lawsuits can occur for monetary damages naming all in a drag net mentality for a larger pool of funds to claim into.

    Fraud pretty much strikes a liability insurance policy to nil and burns down the fence used to hide behind so sharks eat sharks from here on out. Woe to anyone who granted indemnity. Wait til houses with unclear title are presented as settlement.

    Wear a Henry Paulson T shirt just to be antagonistic.

  12. eyesoars

    Looking up addresses w/ google, is there any significance to the fact that MERS and LPS seem to be in the same location in Minnesota (1270 Northland Dr., Suite 200, Mendota Heights, MN)?

    LPS also has factilities at 1140 Centre Point Dr., Mendota Heights, MN.

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