Tuesday, December 28, 2010

Lender Processing Services - The "Dirty Tricks" Link to the Mortgage Crisis?

If you do foreclosure defense work, or if you are just interested in what's going on with the mortgage meltdown crisis, then you need to read this December 6, 2010 article by Scot Paltrow of Reuters, Special Report: Legal Woes Mount for a Foreclosure Kingpin. This is an almost 4,000 word article with no fat in it, and that's why it is a must-read. Lender Processing Services (trading as LPS) is a $2.8 billion company that hardly anybody has heard of outside of the mortgage servicing industry. LPS performs a variety of backroom processing tasks for lenders, servicers and securitized trusts, but what it is getting in trouble for is its foreclosure processing services. Whistleblowers have alleged a pattern and practice of falsified affidavits prepared in the context preparing mortgage foreclosure cases. Now the company is the subject of multiple criminal investigations and several class action lawsuits have been filed against it.

According to the Reuters article, 14 of the 15 biggest loans servicers use LPS for processing tasks, and Bank of America (because there's no sinking ship that's too far gone for BofA to jump on) started using LPS earlier this year.

Consumer lawyers need to be aware of LPS's computer network called the "LPS Desktop". According to Routers, the LPS Desktop "starts foreclosure actions, assigns work to law firms and supervises the cases to conclusion with almost no intervention by humans." LPS chose the law firms used to file the foreclosure cases. In part, the firms were chosen based upon how fast they could get the cases filed, impliedly, firms that took extra time to verify information given were locked out of the system. The LPS computers took data directly from the lenders, integrated it with LPS's document handling (and manufacturing) and forwarded the information electronically to the chosen law firms. The law firms pay LPS upon receiving the case. Now, it's illegal in most states for an attorney or law firm to pay a nonlawyer for referring a case. LPS says that the law firms are paying for use of the computer system, but if the lawyers don't pay if business is not referred, or pay more when business is referred, that doesn't seem too supportable.

If you are a consumer lawyer defending a foreclosure case, I suggest that you submit an interrogatory asking if the foreclosure form or its client used computer system or software by Lender Processing Services in preparing the case for litigation. If so, then you have the basis for further investigation.

No comments:

Post a Comment

Note: Only a member of this blog may post a comment.