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Nevada Files Suit against LPS; LPS Responds

BY JANN SWANSON
Another shoe dropped last week as the Nevada attorney general brought suit against Lender Processing Services, DOCX, LPS Default Solutions and other LPS subsidiaries for engaging in deceptive practices against Nevada consumers. The lawsuit includes allegations of widespread document execution fraud, deceptive statements on the part of LPS about efforts to correct document fraud, misrepresentation about its 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.”

Attorney General Catherine Cortez Masto said of the suit, “The robo-signing crisis in Nevada has been fueled by two main problems: chaos and speed. 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.”

The suit, filed in the 8th Judicial District of Nevada, follows an investigation into LPS’ default services of residential mortgages in the state which has led the nation in foreclosure activity for 59 straight months. LPS’ misconduct was confirmed through testimony of former employees, interviews of servicers and other industry players, and extensive review of more than 1 million pages of relevant documents. Witnesses described LPS, the nation’s largest provider of default mortgage services, 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 suit alleges that LPS:

Engaged in a pattern and practice of falsifying, forging and/or fraudulently executing foreclosure related documents;
Required employees to execute and/or notarize up to 4,000 foreclosure related documents every day;
Fraudulently notarized documents without witnessing their actual signing;
Implemented a widespread scheme to forge signatures on key documents to ensure that volume and speed quotas were met;
Concealed the scope and severity of the document execution fraud by claiming the problems were limited to clerical errors;
Improperly directed and/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;
Improperly obstructed communication between foreclosure attorneys and their clients; and,
Demanded a kickback/referral fee from foreclosure firms for each case referred to the firm by LPS and allowed this fee to be misrepresented as “attorney’s fees” on invoices passed on to Nevada consumers and/or submitted to Nevada courts.
In response to the suit LPS issued a press release strongly disputing allegations in the complaint. The company said it had cooperated with the Attorney General’s office for more than 14 months to resolve the inquiry “but its efforts 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.”

LPS said it had previously disclosed some issues with some of its own document execution practices it had discovered during an internal review, but was “not aware of any person who was wrongfully foreclosed upon as a result of a potential error in the processes used by our employees” and will “vigorously defend against the complaint.”

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