AG hits foreclosure processor with fraud allegations
Nevada’s attorney general has sued foreclosure specialist Lender Processing Services Inc., claiming it has been involved in widespread fraud involving robosignings and other problems.
Attorney General Catherine Cortez Masto’s office filed suit on Thursday against LPS, based in Jacksonville, Fla., and a group of subsidiaries that includes DOCX LLC and LPS Default Solutions Inc.
"The lawsuit follows an extensive investigation into LPS’ default servicing of residential mortgages in Nevada, specifically loans in foreclosure. It includes allegations of widespread document execution fraud, deceptive statements made by LPS about efforts to correct document fraud, improper control over foreclosure attorneys and the foreclosure process, misrepresentations about LPS’ fees and services, and evidence of an overall press for speed and volume that prevented the necessary and proper focus on accuracy and integrity in the foreclosure process," Masto’s office said in a statement Friday.
The suit in Clark County District Court in Las Vegas follows criminal robosigning fraud charges filed by Masto’s office against two LPS officers and four notaries.
The criminal cases claim notaries falsely certified the signature of people not in their presence — two LPS officers.
The LPS officers had allegedly directed employees to forge their names on documents and were responsible for the filing of tens of thousands of fraudulent foreclosure papers with the Clark County Recorder’s Office between 2005 and 2008.
"The robosigning crisis in Nevada has been fueled by two main problems: chaos and speed," Masto said in a statement. "We will protect the integrity of the foreclosure process. This lawsuit is the next, logical step in holding the key players in the foreclosure fraud crisis accountable."
LPS, which has been targeted in numerous state and federal probes over its role in the foreclosure process, on Friday said it “strongly disputes” the allegations in Masto’s lawsuit.
“LPS has cooperated with the Attorney General’s office for more than 14 months to resolve its inquiry in a manner which would benefit the citizens of Nevada,” LPS said in a statement. “As the company has previously disclosed, it has discovered, during its own internal reviews, potential issues related to some of its past document execution practices. However, the company is not aware of any person who was wrongfully foreclosed upon as a result of a potential error in the processes used by our employees. LPS will vigorously defend against the complaint filed by the Nevada Attorney General.”
LPS also complained its “efforts to engage in meaningful discussions with the Nevada Attorney General’s office have been frustrated by the Nevada Attorney General’s decision to outsource its investigation to Cohen Milstein Sellers & Toll PLLC, a plaintiff’s law firm located in Washington, D.C., in apparent violation of Nevada law.”
“The complaint highlights misconceptions about LPS and seeks to sensationalize a variety of false allegations in a misleading manner,” the company said.
In the Nevada robosigning cases, the publicly traded company insists there have been no wrongful foreclosures in which someone current on their mortgage has been foreclosed on.
Masto's office, however, has said the fraudulent foreclosure filings in Nevada have potentially called into question the validity of foreclosures associated with the documents.
A spokeswoman for the attorney general's office said it hadn't been determined how many foreclosures were affected by the alleged LPS robosigning practices, and that the full scope of the problem would be determined during the fact-finding portion of the lawsuit.
"We suspect thousands of potential foreclosures have been affected,'' spokeswoman Jennifer López said.
Nevada's Dec. 15 lawsuit against LPS alleges, among other things, that the company:
• Schemed to forge signatures on key documents to ensure that volume and speed quotas were met.
• Required employees to process up to 4,000 foreclosure-related documents every day.
• Fraudulently notarized documents by certifying them without ensuring that the notary did so in the presence of the person signing the documents.
• Misrepresented that its document problems were limited to clerical errors.
• Improperly directed or controlled the work of foreclosure attorneys by imposing inappropriate and arbitrary deadlines that forced attorneys to churn through foreclosures at a rate that sacrificed accuracy for speed.
• Demanded a "kickback/referral fee" from foreclosure firms for each case referred to the firm by LPS and allowed the fee to be misrepresented as “attorney’s fees” on invoices either passed on to Nevada consumers, submitted to Nevada courts or both.
The issue is of particular interest in Nevada, which for 59 consecutive months has led the nation in foreclosures.