Oregon Attorney General Ellen Rosenblum announced Thursday that Oregon, 45 other states and the District of Columbia have agreed to settle legal claims against Lender Processing Services, Inc. (LPS) and its subsidiaries, LPS Default Services, Inc. and DocX, LLC.
The companies were allegedly involved in widespread “robo-signing” of foreclosure documents and other abuses related to mortgage loan servicing.
The Oregon Department of Justice claimed in a complaint filed Thursday in Multnomah County Circuit Court that these practices violated Oregon's consumer protection law, the Unlawful Trade Practices Act.
LPS has agreed to pay $120.6 million to the settling states and has pledged to reform its business practices. Oregon will receive $3 million from the settlement.
“The Oregon Department of Justice is committed to a fair and equitable foreclosure process,” Rosenblum said. “We will continue to be vigilant against companies that cut corners and violate the rights of Oregonians.”
LPS provides mortgage loan processing and other services to some of the largest banks in the country. More than half the company’s $2 billion a year in revenue in 2011 came from Wells Fargo, JP Morgan Chase and the other largest mortgage loan servicers.
After the housing bust, foreclosure became a big part of LPS’ business. In 2011, the company’s “Default Management Solutions” unit generated more than $816 million in revenue.
LPS has been the target of investigations by federal banking regulators, the U.S. Justice Department and several state attorneys general, which determined the company and its subsidiaries prepared thousands of real property documents with forged signatures or other problems.
In a separate case, former DocX President Lorraine O. Brown pleaded guilty to criminal fraud charges in November 2012, one of the few criminal cases to come out of the economic crash and resulting wave of home foreclosures.
In her plea, Brown admitted to participating in the falsification of more than a million documents.
In this settlement, LPS stipulates to important facts uncovered in the investigation, including 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, as well as other improprieties in the document execution and recordation or filing process.
The stipulated judgment requires LPS to properly execute documents; prohibits signature by unauthorized persons or persons without first-hand knowledge of facts attested to in certain mortgage-loan documents; requires enhanced oversight of the default services provided by LPS; and mandates a review of all third-party fees to ensure that the fees have been earned and are reasonable and accurate.
The settlement also:
- Prohibits LPS from engaging in the practice of surrogate signing of documents;
- Requires LPS to ensure that it 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 works;
- 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);
- 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;
Requires LPS to meet all applicable state requirements to act as a trustee or successor trustee.
The judgment also requires LPS to undertake a review of documents executed during the period of January 1, 2008 to December 31, 2010 to determine which, 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 to the Attorney General of the status of its review and/or modification of documents.
Jeff Manning of the state DOJ said the state's $3 million share of the settlement will go to the agency's consumer protection and education account.
"This account actually pays for the DOJ's consumer protection/financial fraud unit, which is completely self-supporting," he said.
However, Manning said consumers could get some of the funds from the settlement.
The deal calls for a third-party to inspect all LPS documents between 2008 and 2010. If it can be determined that improprieties by LPS or one of its subs actually did a homeowner financial harm, there is the possibility that LPS will have reimburse them.
"How that plays out exactly remains to be seen," he said. "The plan is for a toll-free telephone to be established next month for consumers/homeowners to call and learn more about the process and their eligibility."
In the meantime, he said, Oregonians who are curious can go to their local county recorder's office and look at their trust deed and other property documents. If it says "prepared by DocX," they should get call the toll free line, which will be posted on the DOJ Website once it's available.