LPS Report
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» Print This copy is for your personal, non-commercial use only. To order presentat ion-ready copies for distribution to colleagues, clients or customers, use the Reprints tool at the top of any article or visit: www.reutersreprints.com. Special report: Legal woes mount for a foreclosure kingpin Mon, Dec 6 2010 By Scot J. Paltrow JACKSONVILLE, Florida (Reuters) - Lender Processing Services is riding the waves of foreclosures sweeping the United States, but in late October its CEO, Jeff Carbiener, found himself needing to reassure investors in the $2.8 billion company. Although profits we re rol lin g i n, LPS's stock had taken a hit i n the wake of revelations that mortgage companies across the country had filed fraudulent documents in foreclosures cases. Earlier in the year, the company, which handles more than half of the nation's foreclosures, had disclosed that it was under federal criminal in vest igation and admitted that employees at a small subsidiary had falsely signed foreclosur e documents. Still, Carbiener told the Wall Street analyst s in an October 29 conference call that LPS's legal concerns were o verblown, and the stock has jumped 13 percent since its close the day before the call. But a Reuters investigation shows that LPS's legal woes are more serious than he let on. Public records reveal that the company's LPS Default Solutions unit produced documents of dubious authenticity in far larger quantities than it has disclosed, and over a much longer timespan. Questionable signing and notarization practices weren't limited to its subsidiary, called DocX, but occurred in at least one of LPS's own offices, mortgage assignments filed in county recorders' offices show. And rather than halt such practices after the federal investigation got underway, the company shift ed the signin g to firms with which it has close business ties. LPS provided personnel to work in the new signing operations, according to information from an LPS spokeswoman and court records including an October 21 ruling by a judge in Brooklyn, New York. Records in county recorders' offices, and in the judg e's opi nion , show that "robosig ning " and preparati on o f appa rently false d ocuments w ent on at these sites on a l arge scale. In one instance, it helped set up a massive signing operation at the nearby office of a major client, a spokeswoman for the client, American Home Mortgage Servicing, confirmed. LPS-hired notaries who worked there said in interviews that troves of documents were improperly handled. They said that about 200 aff idavits per day were robosigned during the two months the two notaries remained there. A spokesw oman for LPS confirmed to Reu ters that i t had helpe d othe r firms e stablish operatio ns that performed the same function. LPS spokeswoman Michelle Kersch didn't specify which firms. But beginning early in 2010, county recorders' records show, signing shifted also to law firms under contract with LPS. Inter views with key pl ayers and court records also show that pending investigat ions and lawsuits pose a bigger threat to the company than Carbiener let on. The criminal investigation in Jacksonville by federal prosecutors and the Federal Bureau of Investigation is intensifying. The same goes for a separate inqui ry by the Florida attorney general's office. I ndividuals w ith direct knowledge of the federal inquiry said that pr osecutors have impaneled a grand jury, begun calling witnesses and subpoenaed records from LPS. The company confi rmed to Reuters that it has hired Paul McNulty, former deputy U.S. attorney general in the George W. Bush administration, to represent it in the investigation. A spokeswoman for the U.S. Attorney's office declined to comment on the probe. The U.S. Compt roller of the C urrency' s office, which is responsible for supervising national banks, also announced in November that it had teamed up with the Federal Reserve to conduct an on-site examination of LPS. Meanwhile, the threats from four class action lawsuits filed in federal courts appear to be greater than the company has indicated, especially one filed in Mississippi. In a highly unusual move, a unit of the U.S. Justice Department has joined that suit as a pl aintiff . The lawsuit all eges that LPS extrac ted many millions of dollars i n kickbacks fr om law firms thr ough an illegal fee-sharing arrangement , in exchange for doling out lucrative foreclosure work to them. The lawsuit also charges that LPS illegally practices law and routinely misleads homeowners and federal bankruptcy judg es. Carbi ener has sa id there i s li ttle rea son to worry a bout the Mississipp i suit be cause the compa ny al ready prevail ed in a federal lawsuit in Texas that had made nearly identical accusat ions. But court records in that case show that the lawsuit was dropped without any ruling on the merits of the allegations.
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Specialreport:LegalwoesmountforaforeclosurekingpinMon,Dec62010
ByScotJ.PaltrowJACKSONVILLE,Florida(Reuters)LenderProcessingServicesisridingthewavesofforeclosuressweepingtheUnitedStates,butinlateOctoberitsCEO,JeffCarbiener,foundhimselfneedingtoreassureinvestorsinthe$2.8billioncompany.Althoughprofitswererollingin,LPS'sstockhadtakenahitinthewakeofrevelationsthatmortgagecompaniesacrossthecountryhadfiledfraudulentdocumentsinforeclosurescases.Earlierintheyear,thecompany,whichhandlesmorethanhalfofthenation'sforeclosures,haddisclosedthatitwasunderfederalcriminalinvestigationandadmittedthatemployeesatasmallsubsidiaryhadfalselysignedforeclosuredocuments.Still,CarbienertoldtheWallStreetanalystsinanOctober29conferencecallthatLPS'slegalconcernswereoverblown,andthestockhasjumped13percentsinceitsclosethedaybeforethecall.ButaReutersinvestigationshowsthatLPS'slegalwoesaremoreseriousthanheleton.Publicrecordsrevealthatthecompany'sLPSDefaultSolutionsunitproduceddocumentsofdubiousauthenticityinfarlargerquantitiesthanithasdisclosed,andoveramuchlongertimespan.Questionablesigningandnotarizationpracticesweren'tlimitedtoitssubsidiary,calledDocX,butoccurredinatleastoneofLPS'sownoffices,mortgageassignmentsfiledincountyrecorders'officesshow.Andratherthanhaltsuchpracticesafterthefederalinvestigationgotunderway,thecompanyshiftedthesigningtofirmswithwhichithasclosebusinessties.LPSprovidedpersonneltoworkinthenewsigningoperations,accordingtoinformationfromanLPSspokeswomanandcourtrecordsincludinganOctober21rulingbyajudgeinBrooklyn,NewYork.Recordsincountyrecorders'offices,andinthejudge'sopinion,showthat"robosigning"andpreparationofapparentlyfalsedocumentswentonatthesesitesonalargescale.Inoneinstance,ithelpedsetupamassivesigningoperationatthenearbyofficeofamajorclient,aspokeswomanfortheclient,AmericanHomeMortgageServicing,confirmed.LPShirednotarieswhoworkedtheresaidininterviewsthattrovesofdocumentswereimproperlyhandled.Theysaidthatabout200affidavitsperdaywererobosignedduringthetwomonthsthetwonotariesremainedthere.AspokeswomanforLPSconfirmedtoReutersthatithadhelpedotherfirmsestablishoperationsthatperformedthesamefunction.LPSspokeswomanMichelleKerschdidn'tspecifywhichfirms.Butbeginningearlyin2010,countyrecorders'recordsshow,signingshiftedalsotolawfirmsundercontractwithLPS.InterviewswithkeyplayersandcourtrecordsalsoshowthatpendinginvestigationsandlawsuitsposeabiggerthreattothecompanythanCarbienerleton.ThecriminalinvestigationinJacksonvillebyfederalprosecutorsandtheFederalBureauofInvestigationisintensifying.ThesamegoesforaseparateinquirybytheFloridaattorneygeneral'soffice.Individualswithdirectknowledgeofthefederalinquirysaidthatprosecutorshaveimpaneledagrandjury,beguncallingwitnessesandsubpoenaedrecordsfromLPS.ThecompanyconfirmedtoReutersthatithashiredPaulMcNulty,formerdeputyU.S.attorneygeneralintheGeorgeW.Bushadministration,torepresentitintheinvestigation.AspokeswomanfortheU.S.Attorney'sofficedeclinedtocommentontheprobe.TheU.S.ComptrolleroftheCurrency'soffice,whichisresponsibleforsupervisingnationalbanks,alsoannouncedinNovemberthatithadteamedupwiththeFederalReservetoconductanonsiteexaminationofLPS.Meanwhile,thethreatsfromfourclassactionlawsuitsfiledinfederalcourtsappeartobegreaterthanthecompanyhasindicated,especiallyonefiledinMississippi.Inahighlyunusualmove,aunitoftheU.S.JusticeDepartmenthasjoinedthatsuitasaplaintiff.ThelawsuitallegesthatLPSextractedmanymillionsofdollarsinkickbacksfromlawfirmsthroughanillegalfeesharingarrangement,inexchangefordolingoutlucrativeforeclosureworktothem.ThelawsuitalsochargesthatLPSillegallypracticeslawandroutinelymisleadshomeownersandfederalbankruptcyjudges.CarbienerhassaidthereislittlereasontoworryabouttheMississippisuitbecausethecompanyalreadyprevailedinafederallawsuitinTexasthathadmadenearlyidenticalaccusations.Butcourtrecordsinthatcaseshowthatthelawsuitwasdroppedwithoutanyrulingonthemeritsoftheallegations.
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CopiesofLPSinternaldocumentsobtainedbyReutersandtestimonyinlawsuitsshednewlightonthecompany'sunusualdealingswithitsvastnetworkoflawfirms.LPSrelentlesslypressedthemforspeed.Theresultwasalmostinstantfilingofforeclosuredocuments,mostlypreparedbyclericalworkers,notlawyers,accordingtocourtrecords,includingdepositiontestimonybyLPSofficials.SeveraljudicialopinionsfromaroundthecountryandevidencefrominvestigationsinFloridashowthatthesedocumentsoftenwereriddledwithinaccurateinformationabouttheamounthomeownersowed,andweresignedandnotarizedenmassewithoutanyoneatthefirmscheckingtheinformationinthem.UnderLPS'ssystem,lawfirmsthatwereslower,oftenbecausetheirlawyerscarefullypreparedandreviewedcourtdocumentsbeforefilingthem,wereeffectivelypunished,accordingtodepositiontestimonyandothersources.Thecomputerautomaticallyassignedbadratingstothesefirms,andtheflowofworkassignmentstothemdriedup.ABOOMINGBUSINESSFewfirmsbenefitedmorefromthecollapseoftheU.S.housingboomthanLPS.Spunoffasanindependentcompanyin2008,thecompanyhasseenitsprofits,withbighelpfromitsmortgagedefaultservicesbusiness,reach$232millionforthefirstninemonthsof2010.Thatisanearly15percentincreasefromthesameperiodin2009.Itsrevenuelastyearwas$2.4billion,upfrom$1.8billionin2008.Andbusinesscontinuestosurge.CarbienertoldanalystsontheOctober29callthat"wecontinuetogainmarketshareacrossallkeybusinesssegments."InaNovember23reportpreparedforinvestorsandclients,LPSsaidbanksarepushingtoforecloseonpropertiesasrapidlyaspossible,driving"theforeclosureinventoryratetoalltimehighs."ItsaidthatattheendofOctober,thenumberofpropertiesgoingintoforeclosureis"7.4timeshistoricalaveragesandrising."Thebanks'pushtoevicthomeownersfasterandinbiggernumbersthaneverbeforemakesLPS'sservicesevenmorecrucialtothem.LPS'ssuccessisbuiltonitsadvanced,superautomatedsystemthatishighlyefficient,lowcost,andspeedsforeclosuresthroughtocompletion.The"LPSDesktop"startsforeclosureactions,assignsworktolawfirmsandsupervisesthecasestoconclusionwithalmostnointerventionbyhumans.(LPSsaysforeclosureactionsarestartedbyitsclients,theloanservicers.ButcopiesofagreementswithservicersobtainedbyReutersshowthatLPShasdirectaccesstothebanks'andotherservicers'computersystems,andLPSdetectsdefaultsandinitiatesforeclosuresbasedonparametersgiventoitbythebanks.)Fewloanservicerscouldresisthandingoverkeytaskstothecompany.Today,LPSboastsaclientlistthatincludes14ofthe15biggestloanservicers,withhouseholdnamessuchasWellsFargoandJPMorganChaseitstwobiggestclients,accordingtoLPS'smostrecent10KfilingwiththeSecuritiesandExchangeCommission.ThecompanyhassaidthatBankofAmericajoinedasaclientearlierthisyear.LPSsaysthatall50ofthenation'slargestbanksuseatleastsomeofitsservices.Inessence,LPSisagiantelectronicbutlerforthebigbanksandothercompaniesintheindustry.Itattendstoroutinetaskstheloanservicersprefernottodothemselves.Theseincludetrackingmortgagepayments,calculatingamountsowedtoinvestorswhopurchasedbundlesofmortgages,ensuringthatpropertytaxesandinsurancegetpaidandautomaticallyfilingforeclosureactionswhenhomeownersgointodefault.Thependinginvestigationsandlawsuits,however,arefocusingonwhetherLPS,initszealtoserveitsclients,broketherules,inpartbyreplacingmissingbankdocumentswithfictitiousonestomakeforeclosurecasesgothrough.SIGNATURETROUBLEThefirstsignoflegalproblemsforLPSemergedearlierthisyear,whenthecompanydisclosedthatfederalprosecutorsinFloridahadopenedacriminalinvestigationintoapparentlyforgedsignaturesonforeclosuredocumentspreparedbyDocX,theshutteredsubsidiarylocatedinasmallofficeparkinAlpharetta,Georgia.FidelityNationalFinancial,LPS'sformerparent,hadboughtDocXin2005.Theunitsoonbecameahighspeedmill,churningoutmortgageassignmentsmanyofwhicharenowknowntobeofdoubtfulvalidityonbehalfofbanksandinvestortrusts,helpingthemtoforecloseonhomeowners.Mortgageassignmentsaredocumentstransferringownership,usuallyfromtheoriginallenderstotrustsownedbyinvestorswhoboughtsecuritizedpackagesofmortgages.Loanservicerstypicallyfileforeclosureactionsonbehalfofthetrustswhenanyoftheirmortgagesgointodefault.Butcasespoppingupalloverthecountryshowthattheoriginallendersneverhandedoverownershipofmortgagestothetrusts.Assignmentsestablishingownershipofamortgagearerequiredasevidenceinforeclosurecases.DocXturnedouttensofthousandsofnewlymintedmortgageassignments,purportingtoshowtransfersofownershiplongafterthemortgagesshouldhavebeenhandedovertothetrusts,accordingtothestandardprovisionsintrustagreements.ThousandsoftheseborethesignatureofDocXemployeeLindaGreen.Thesignaturesdidn'tlookalike,however,andLPSeventuallyconfirmedthatmultipleDocXemployeeshadsignedhername.Someoftheassignmentsstoodoutbecausetheylistedthenewownerofthemortgagesas"bogusassignee"or"badbene."LPSspokeswomanMichelleKerschsaid"bogusassignee"and"badbene"weresimplystandardplaceholdersondocumenttemplateswhichtheemployeesinadvertentlyhadneglectedtofillinwiththepropernames.InhisOctober29conferencecallwithanalysts,CarbienersaidthatwhenthecompanydiscoveredtheDocXwrongdoinginDecember2009,itimmediatelystoppeditandsoonshutDocXdown.ButitturnsoutthatDocXcontinuedoperatingmuchlongerthanLPSoriginallyhadacknowledged.InawrittenresponselastweektoquestionsfromReuters,LPS'sKerschconfirmedthatDocXactuallywasn'tcloseduntilAugust2010.Shesaid:"ThelastdocumentsignedbyDocXwasonMay14,2010."Butshesaidnoimpropersigninghadoccurredtheresince2009.DUBIOUSDOCUMENTSHundredsofpublicrecordsexaminedbyReutersshowthatproductionofsuspectmortgageassignmentswasnotlimitedto
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DocX.TherecordsindicatethatemployeesinoneofLPS'sownoffices,inMendotaHeights,Minnesota,signedandnotarizedlargenumbersofdocumentswhichformultiplereasonsappearinvalid.Recordsfiledwithcountyrecorders'officesshowthattheMinnesotaofficecontinuedtoturnoutthesedocumentsatleastthroughtheendofJanuary2010.DozensofassignmentsweresignedbyLPSMinnesotaofficeemployeeswholistedthemselvesascorporateofficersofbanksandotherloanservicers,asamplingofpublicrecordsfromcountiesinfivestatesshows.AsatDocX,theassignmentsweresignedyearsafterthemortgagesshouldhavebeentransferredtotheinvestmenttrusts.ThesignatureofoneoftheseLPSemployees,LiquendaAllotey,appearsonthousandsofmortgageassignments.Homeowners'lawyersandatleastonejudgefederalbankruptcyjudgeJoelB.RosenthalinMassachusettshavenotedthatAllotey'ssignatureisasimplezigzagline,raisingquestionsaboutwhetherotherindividualsmayhavesignedhisname.Titleslistedbelowthesignatureidentifyhimvariouslyas"vicepresident"or"attorneyinfact"foratleast13banksandmortgagecompanies.LPSspokeswomanKerschsaidAlloteysignedallofthedocumentshimself,andsaidallmortgageassignmentspreparedintheMinnesotaoffice"wereexecutedunderalawfulgrantofauthority."Shedidn'tspellout,however,howsuchauthoritywasgiven.Inanyevent,twootheraspectsofmanymortgageassignmentssignedbyMinnesotaemployeesraisestrongdoubtsaboutthedocuments'legitimacy.Statelaws,backedupbycourtdecisions,requirethatmortgageinvestmenttrustsandothersfilingtoforecloseonhousespossessavalidmortgageassignmentatthetimetheyfileforforeclosure.Ifitdoesn't,thelawsrequirethatthecasebedismissed.Anexaminationofcountyrecorders'recordsturnedupdozensofmortgageassignmentssignedandnotarizedbytheMinnesotaofficeweeksormonthsafteraforeclosurecasehadbeenfiled.Recordsshowthateventhoughinvalid,thebelatedmortgageassignmentsoftenenabledforeclosurecasestosailthrough.AprilCharney,anattorneywhorepresentshomeownersatJacksonvilleAreaLegalAid,saidinaReutersinterviewthatinmostinstanceshomeownerscan'taffordlawyersanddon'tchallengetheforeclosures.Inmanystates,judgesoftenapprovetheforeclosureswithoutcarefullyexaminingthedocuments,shesaid.Andatleastuntilrecently,whenwidespreadquestionswereraisedaboutthelegitimacyofmortgagedocuments,judgesroutinelyacceptedbelatedmortgageassignmentsevenincasescontestedbythehomeowners,shesaid.EquallydifficulttoexplainaremortgageassignmentssignedbyLPSMinnesotaemployeespurportingtobeofficersoflendersthatnolongerexisted.Forexample,inJanuary2010,twoMinnesotaemployeesjointlysignedoneasofficersofEncoreCreditCorp.,defunctsince2008.Onotheroccasions,LPSemployeessignedasauthorizedofficersofAmericanBrokersConduit,wellafterthesubprimelenderhadbeenliquidatedinbankruptcy.AndinmanyinstancestheysignedasofficersofSandCanyonCorp.InaMarch18,2009affidavit,SandCanyon'spresident,DaleM.Sugimoto,saidthecompanyhadcompletelyexitedthemortgagebusinessin2008andhadnomortgagestoassign.Inwrittenanswerstoquestions,LPSspokeswomanKerschdidn'tresponddirectlytoquestionsabouttheemployeessigningmortgageassignmentsaftertheforeclosureshadbeenfiled,oraboutsigningonbehalfofdefunctcompanies.Instead,shesaidthattheLPSemployeessignedmortgageassignmentsbecauselawyerswhohadfiledforeclosurecasesaskedthemto.Shesaidthelawyers"decidewhenandifanassignmentofmortgageisrequired."ShortlyafterthefederalinvestigationwaslaunchedinDecember2009,LPSbeganmovingtocurtaildocumentsigningactivitiesatthecompanyitself.LPSsaysthattheMinnesotaofficestoppedsigningmortgageassignmentsattheendofJanuary2010,andpublicrecordsappeartoconfirmthat.CarbienersaidduringtheanalystsmeetingthatLPShasnowendedallsigningofmortgageassignmentsandaffidavitsatthecompany.Withoutsomeonetodrawupreplacementdocuments,though,LPS'sclientsfacedpotentialhardship,becausesomanymortgageswereneverassignedbylenders,asrequired,inthefirstplace.Withoutthesedocuments,thousandsofforeclosuresalloverthecountrywouldcometoahalt.Reutershaslearnedthatratherthanstampingoutthepractice,LPSinDecember2009begantransferringsigningoperationsoutofitsownofficesandintothoseoffirmsithascloserelationshipswith.KerschconfirmedthatLPSsentpersonneltowork"atclientlocationstoassistclientsduringthisperiod."Forexample,LPSarrangedthroughalocalemploymentservicetohireaboutadozennotaries,sendingthemtoworkatanewsigningoperationsetupintheJacksonvilleofficeofAmericanHomeMortgageServicing,oneofLPS'sbiggestclients.Recordsfromcountyrecorders'officesshowthatatleastasrecentlyasOctober,AmericanHomeMortgageServicingemployeessignedexactlythesametypeofquestionablemortgagesassignmentsthatLPSstaffersatDocXandinMinnesotahadsigned.TheseincludedassignmentsdoneonbehalfofdefunctcompanieslikeAmericanBrokersConduit,andafterforeclosureactionsalreadyhadbeenfiled.ReutersobtainedapartiallistofthenamesoftheLPShirednotaries.Copiesofmortgageassignmentsavailablepubliclyshowthatthesenotariesnotarizedmanyoftheseassignments,includingonessignedonbehalfofdefunctcompanies.Ininterviews,twoofthenotaries,whoaskedthattheynotbeidentified,saidtheAmericanHomeMortgageServicingofficealsosetupa"robosigning"operationforaffidavits,anothertypeofdocumentrequiredinforeclosurecases.Theemployeeswhosignedtheaffidavitswereswearingthattheyhadverifiedthefactslistedinthem,suchasthespecificamountsowedbyhomeowners.
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Butthetwonotaries,whosaidtheyweredismissedafterraisingquestionswithsupervisorsaboutthepractices,saidthateachmorningaboutahalfdozenAmericanHomeMortgageServicingemployeesinaboutanhourwouldsignsome200affidavitsreceivedviaLPS'scomputersystem,withoutreadingthem,letaloneverifyingthefactstheycontained."Inthattime,comeon,youhavenotverifiedfiguresin200documents.That'simpossible,"oneofthenotariessaid.PhilippaBrown,spokeswomanforAmericanHomeMortgageServicing,saidinanemailedstatementthat"WerecentlyhadindependentauditsconductedonourprocessesanditwasfoundthatatnotimewasAHMSI(AmericanHomeMortgageServicingInc.)'robosigning'."SheconfirmedthatthecompanyhadusedDocXuntilDecember2009,andthen"contractedwithLPS"toprovideitwithnotaries"inconnectionwithexecutionofaffidavitsandotherdocuments"inAmericanHomeMortgageServicing'soffice.Concerningassignmentsthecompanysignedfordefunctlenders,BrownsaidAmericanHomeMortgageServicing"obtainsauthorizationfromthepreviousparties,"butdidnotexplainhow.LPSacknowledgedthatithadsentnotariestoseveralcompaniestohelpthemsetupsigningoperations.Kerschsaid:"WhenLPSDefaultSolutionsgrouptransitionedawayfromsigningdocumentsonbehalfofitscustomers,insomecasesitemployednotarieswhoworkedonsiteatclientlocationstoassistclientsduringthisperiod."ThespokeswomanconfirmedthatLPSprovidedtrainingatthesesites,butsaiditwasonly"technical"trainingonusingtheLPSDesktopsystem.TROLLINGFORCASESItremainsunclearwhetherLPSfacesmorelegalrisksbecauseofitsdocumentsigningoperationsorbecauseofitsoddarrangementwiththelawyersassignedtofileforeclosureactions.Reutershasobtainednewdetailsofhowtherelationshipworkedfromcopiesofthe"networkagreements"thelawfirmssignwithLPS,amongothersources.Interviewsandrecordsfromcourtcasesshowthatthissystemoftenworkedtothedetrimentofhomeownersstrugglingtokeeptheirhomes.LPSsaysthatclientsaretheoneswhopicklawfirmstorepresenttheminforeclosurecases.ButcopiesofitsagreementswithclientsreviewedbyReutersstatethatthecompany'sclientssignuptouseLPS'snetworkoflawyer.Theagreementsanddepositionsfromlawsuitsshowthatwhenahomeownergoesintodefault,theLPSsystemautomaticallyselectsalawfirminitsnetwork,sometimesusingcriteriasetbyaclient,andtransmitsanofferofworkthatpopsuponthelawfirm'sLPSDesktopscreen.Thefirmhasnomorethanacoupleofhourstoacceptthejob.Andifitdoes,itimmediatelyagreestopayanupfrontfeetoLPS.ThelawfirmsalsopayLPSamonthlyfeeforuseoftheLPSDesktopsystem.Thecompanydeniesthatitchargesfeestolawyersinexchangeforassignmentsofwork.KerschsaidthecompanychargesfeesstrictlyfortheuseofLPS'scomputersystem.CarbieneronOctober29said:"Ourservicesarenonlegal,andaresimilartoanyotheroperationalcostofalawfirmsuchasthelicensingcoststheypayforwordprocessingsoftwareoraccountingsoftware."ButinalawsuitdepositiononJanuary13,2010,ChristianHymer,anLPSfirstvicepresident,testifiedthatthecompanyoftensignsupthelawfirmsthatarepartofitsnetwork.Inaddition,untilrecently,lawyerssignedworkagreementsonlywithLPS,notwiththeloanservicers.KerschsaidthatcurrentlylawyersarerequiredtosignseparateagreementsbothwithLPSandtheservicers.Lawsinnearlyallstatesforbidlawyerstosharelegalfeeswithnonlawyers.Thelawsareintendedtopreventkickbacksforfunnelinglegalworktoanattorney,thecostofwhichwouldbepassedontounsuspectingclientsor,asinforeclosurecases,billedtohomeowners.LPSisn'talawfirm.TheMississippiclassactionsuitallegesthatLPSisanonlawyermiddlemanbetweentheservicers(actingonbehalfoftruststhatownthemortgages)andthelawyers.Itallegesthatthecompanyillegallydecideswhichlawfirmsgettofileforeclosurecases,andmakesdecisionsaboutwhattheyfile.RED,YELLOW,GREENInterviews,depositiontranscriptsandLPS'sownrecordsunderlinethatthecompanykeepsitsclientshappyandmaximizesitsownfeeincomebywhippinglawfirmstogallopcasesthroughthecourts.Thelawfirmsareonastopwatch:KerschconfirmedthattheLPSDesktopsystemautomaticallytimeshowlongeachfirmtakestocompleteatask.Itassignsfirmsthatturnoutworkthefastesta"green"ratingslowerones"yellow"and"red"forthosethattakethelongest.CourtrecordsshowthatgreenratingsgotofirmsthatjumponofferedassignmentsfromtheirLPScomputerscreensandalmostinstantlyturnoutreadytofilecourtpleadings,oftenusingteamsoflowskilledclericalworkerswithlittleoversightfromthelawyers.CopiesofcompanynewslettersfromshortlybeforeLPSwasspunoffshowthatthecompanyeachyeargaveawardstothelawfirmsthatwereconsistentlythefastest.Firmsthatmovemoreslowlywereslappedwith"red"designations.Forthem,workoffersdriedup.LPSdeniesthattheratingsystemisusedtopunishslowerfirms.Kerschsaidtheratingsaregeneratedsothatlawfirmscancomparetheirspeedandefficiencywithanaveragecalculatedforawidegroupoffirms.LEGALAFFAIRSTheterm"robosigners"wascoinedtodescribethelowlevelclericalworkerswhosignedmanythousandsofaffidavitsforforeclosurecases,swearingtothetruthoffactstheyhadneverchecked.Butitturnsoutthattheprofessionalsatthesefirmstheattorneyswhohavestrictlegalandethicalobligationstofiletruthfuldocumentsincourthavecarriedoutsimilaractivitiesonalargescale.Theyallowedotherstosigntheirnamestomultipletypesofcourtpleadingstheyhadneverreadorbotheredtocheck,involvingmanytypesofdocuments.
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InanApril2009courtdecision,DianeWeissSigmund,afederalbankruptcyjudgeinPhiladelphia,specificallyfaultedlawyerswhosefirmfiledLPStransmitteddocumentsincourtusingclericalworkerstosignthenameofalawyerwhohadn'tlookedatthem.Inthatcase,itturnedoutthat,contrarytothedocumentssuppliedviatheLPSsystem,thehomeownersweren'tindefaultontheirmortgage.ReferringtotheLPScomputersystem,thejudgestated,"theflawsinthisautomatedprocessbecomeapparent."Sheadded:"Anattorneymustceaseprocessingfilesandactlikealawyer."JacksonvillelegalaidattorneyCharneysaysthatcarelesslyprepareddocuments,containingbasicerrors,havebeenusedtoforecloseonabigportionofthehomeownerswhohavelosttheirhouses.LPSdeniesthatitssystemencouragescarelessnessbylawfirms.IntheOctober29conferencecall,ChiefExecutiveCarbienersaidthatbasedonroutineinternalreviews,"wearenotawareofanydefectsinoursigningandreviewprocessesthatresultedinthewrongfulforeclosureofanyborrower."(EditingbyJimImpocoandClaudiaParsons)
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