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Saturday, May 25, 2024 | Back issues
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Nevada Seeks Millions From Default Firm

LAS VEGAS (CN) - Lender Processing Services, the nation's "dominant" provider of mortgage default services, forged foreclosure documents in exchange for referral kickbacks totaling "millions of dollars," Nevada's attorney general says.

Nevada recorded the nation's highest foreclosure rate in October, for the 58th consecutive month. And "LPS is the nation's dominant provider of mortgage defaults services, processing more than fifty percent (50%) of all foreclosures annually," Attorney General Catherine Cortez Masto says in the complaint. "As of 2010, defaults management services comprised the largest part of LPS' business, accounting for approximately forty-three percent (43%) of the company's total 2010 revenue of $2.456 billion."

The attorney general says that LPS, based in Jacksonville, Fla., required employees to execute or notarize up to 4,000 foreclosure-related documents a day that were fraudulently notarized, and that the company demanded kickbacks and referral fees from foreclosure firms.

LPS disputed the allegations in a statement, saying the lawsuit "highlights misconceptions about LPS and seeks to sensationalize a variety of false allegations in a misleading manner."

"[T]he company is not aware of any person who has wrongfully foreclosed upon as a result of a potential error in the processes used by its employees," the company said in its statement.

But the attorney general claims LPS "engaged in a pattern and practice of deceptive conduct that willfully misled consumers, courts and the public, resulting in countless foreclosures that were predicated upon false, deceptive and deficient documents that LPS prepared and/or executed."

The company "falsified, forged and/or fraudulently executed an unknown number of foreclosure-related documents in Nevada and across the country" that it knew would be relied upon by "homeowners, courts, attorneys and servicers to pursue foreclosures to properties located in Nevada," according to the state's 39-page complaint, which contains 115 pages of exhibits and attachments.

The attorney general claims that LPS also concealed that its subsidiary, DOCX LLC, "forged signatures on thousands of key mortgage documents by falsely representing that the problems involved only a clerical, notarization error."

The nation's foreclosure crisis "has been fueled by two main problems: chaos and speed," Nevada says. "LPS' business model is designed to take advantage of the former by increasing the latter. The faster LPS is able to process foreclosures - without regard to the accuracy of the documents or the integrity of the process - the more money LPS makes."

LPS achieved its market dominance "by offering mortgage servicers a program that is too good to be true - managing key aspects of the foreclosure process for free," according to the complaint.

"LPS promises servicers that it can reduce their costs, shorten foreclosure timelines, and allow servicers to pass savings on to their own investor-clients." In doing so, LPS "compresses foreclosure timelines well beyond what industry standards required by forcing its own employees to churn out documents faster than anyone could review or verify them. LPS also forces foreclosure attorneys and trustees in the LPS network meet aggressive and arbitrary deadlines, resulting in a legal process that is riddled with inaccuracies," according to the complaint.

Nevada says at least a dozen state and federal agencies have investigated LPS' role in the foreclosure process.

"Former employees and industry players describe LPS as an assembly-line sweatshop, churning out documents and foreclosures as fast as new requests came in and punishing network attorneys who failed to keep up the pace," the attorney general said in a statement.

As a result, "Nevada consumers have paid the ultimate price, through bankruptcies, evictions and foreclosures that were predicated upon false, forged, fraudulent and/or inaccurate documents," according to the complaint. "Moreover, consumers have paid millions of dollars in hidden and deceptively labeled kickbacks and other fees that LPS charged and that LPS knew were and/or caused to be passed on to the consumer."

LPS's default services revenue, which includes foreclosure services, quadrupled from $277.8 million in 2006 to more than $1 billion in annual revenue in both 2009 and 2010, according to the complaint.

Nevada seeks civil penalties of $5,000 per violation of the Nevada Deceptive Trade Practices Act, and another $12,000 per violation against elderly or disabled Nevadans.

The complaint was filed by Deputy Attorney General Binu Palal.

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