Foreclosure processing company to pay Iowa nearly $1.1 million after state attorneys general alleged "robo-signing" and other improper conduct
(DES MOINES, Iowa) One of the nation’s largest foreclosure processing companies has agreed to pay the state nearly $1.1 million after a group of state attorneys general, including Attorney General Tom Miller, alleged that the Florida company “robo-signed” foreclosure documents and engaged in other improper conduct related to mortgage loan default servicing.
The agreement with Lender Processing Services, Inc. and its subsidiaries, LPS Default Solutions and DocX, is part of a $120 million settlement with state attorneys general in 45 states and also the District of Columbia. District Court Judge Robert J. Blink approved the consent judgment Thursday after Miller filed a consumer fraud petition in Polk County District Court alleging improper conduct.
“We allege that LPS and its subsidiaries harmed homeowners and helped exacerbate our nation’s housing crisis,” Miller said. “We will not tolerate fraud and misrepresentations to our courts. When the stakes include someone losing their home, our courts expect truth and accuracy and so do Iowans.”
DocX LLC prepared and recorded mortgage-related documents throughout the country. DocX’s main clients were residential mortgage servicers, which typically undertake certain actions for the owners of mortgage-backed promissory notes. Servicers hired DocX to, among other things, assist in creating and executing mortgage-related documents filed with recorders’ offices.
In November, DocX’s former chief executive, Lorraine Brown, of Alpharetta, Georgia, pleaded guilty in U.S. District Court in Jacksonville, Florida, to conspiracy to commit mail and wire fraud. Brown admitted to participating in a six-year scheme to prepare and file more than one million fraudulently signed and notarized mortgage-related documents with property recorders’ offices across the country. Brown has not yet been sentenced.
The consent judgment requires LPS and its subsidiaries to reform its business practices and, if necessary, to correct documents it executed to assist homeowners. The court order requires the company to properly execute documents and prohibits signatures by unauthorized persons or those without first-hand knowledge of facts attested to in the documents, enhanced oversight of the default services provided, and a review of all third-party fees to ensure that the fees have been earned and are reasonable and accurate. The settlement also accomplishes the following:
- Prohibits LPS (including DocX) from engaging in the practice of surrogate signing of documents;
- Ensures that LPS 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); and
- 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.
As part of the settlement, LPS stipulates to important facts uncovered in the investigation, including the practice by DocX of 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.
LPS will undertake a review of documents executed during the period of January 1, 2008 to December 31, 2010 to determine what documents, if any, the company must re-execute or correct. 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. Consumers may also call the LPS toll-free number and request review and correction of any documents executed by LPS at any time.
The following states joined Iowa in today’s settlement: Alabama, Alaska, Arizona, Arkansas, California, Connecticut, Florida, Georgia, Hawaii, Idaho, Illinois, Indiana, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Minnesota, Mississippi, Montana, Nebraska, New Hampshire, New Jersey, New Mexico, New York, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee, Texas, Utah, Vermont, Virginia, Washington, West Virginia, Wisconsin, Wyoming, and the District of Columbia.
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