15 Apr Three strikes and You’re Out: Lender Processing Services is Zero for April
For some time, I have been exposing the fraud that is the Lender Processing Services (and mortgage servicers in general) business model. I have discussed how it is so revered by the mortgage servicing community because it will do anything, legal or illegal, to help a mortgage servicer foreclose your home.
Itâ€™s one thing when a small-time litigator from Jacksonville, Florida makes accusations (thatâ€™s me), and then it is another thing when 60 Minutes does it. Itâ€™s something even more when the federal regulators recognize LPSâ€™s shenanigans, but when a federal judge confirms everything I (and many other lawyers) have been saying for years about LPS, you know LPS is in trouble.
Who is LPS? LPS (formerly known as Fidelity National Default Solutions) is a default servicer for one out of every two mortgages in this country. It lurks in the shadows of the mortgage industry like a hit-man for the mob, and when LPS whacks you, you never see it coming.
Needless to say, LPS has had a BAAAAAD April, and the monthâ€™s only half over. It all started with the 60 Minutes report, Mortgage paperwork mess: Next housing shock? In the report, Scott Pelley describes the epidemic of forged mortgage documents created by LPS Default Solutions and their super-human employee, Linda Green. I say super-human, because Ms. Green is vice-president of 20 banks, and she can execute thousands of mortgage assignments every day.
Well, as it turns out, Ms. Green isnâ€™t so super, and sheâ€™s not human â€“ at least not one human. In fact, a dozen LPS employees were signing Linda Greenâ€™s name, thousands and thousands of times over, on key documents necessary to foreclose on homes. These documents, to add that â€œauthentic touch,â€ were all notarized by other employees who also knew they were committing fraud.
Then a couple of days ago, a joint report by the Federal Reserve, Office of Thrift Supervision and Office of the Comptroller of the Currency found significant irregularities in the foreclosure activities of the nationâ€™s largest mortgage lenders, including default servicer LPS, and ordered those lenders to â€œremediate all financial injury to borrowers caused by any errors, misrepresentations, or other deficiencies.â€
LPS and the other dirt-bag mortgage servicers â€“ including Citibank, Bank of America, JPMorgan Chase and Wells Fargo â€“ signed Consent Orders agreeing to change their evil ways and come clean. But in typical LPS double-speak fashion, an LPS representative responded to the consent order by stating, â€œThe Order does not make any findings of fact or conclusions of wrongdoing, nor does LPS admit any fault or liability.â€ Um, o.k. Soooâ€¦.
Now the doozie – The one that is sure to spell the beginning of the end for LPS: A federal bankruptcy judge took the testimony of an LPS employee and found that, based upon that employeeâ€™s testimony, LPS has concocted a scheme for committing fraud as a common business practice.
In her lengthy, scathing opinion, the Honorable Elizabeth W. Magner (a bankruptcy Judge from New Orleans) detailed the unbelievable testimony of Ms. Dory Goebel, an LPS employee who was caught posing as Assistant Secretary for Option One Mortgage Corporation. The Memorandum Opinion reads like the last chapter of a Grisham novel, where the bad guy is exposed and the little guy wins the day.
Ms. Goebel filed an Affidavit in the Wilsonsâ€™ bankruptcy case as evidence that Option One should be allowed to remove itself from the Wilsonsâ€™ bankruptcy to foreclose on their home. Ms. Goebel testified in the affidavit that the Wilsons had failed to make necessary mortgage payments entitling Option One to relief from the bankruptcy stay.
The only problem with Option Oneâ€™s affidavit is that it was absolutely false because the Wilsons had made all required payments. After multiple hearings, Option Oneâ€™s lawyer admitted to the judge that the Wilsons were in fact current and that his only contact was not Option One at all â€“ it was LPS.
Knowing she was on to something, Judge Magner ordered Option One, LPS, Dory Goebel and all the law firms involved be investigated to unearth exactly how and why Option One filed its motions in the Wilsonsâ€™ bankruptcy case.
What transpired was a most stunning series of admissions:
- Dory Goebel isnâ€™t an Assistant Secretary for Option One. Sheâ€™s an employee of LPS.
- Option One had no control over the debtorâ€™s file once in bankruptcy. LPS controlled every aspect of the Wilsonsâ€™ file.
- Bankruptcy payments were sent to Option One and not entered into LPSâ€™s system. Option One notified LPS that it had the bankruptcy payments LPS accused the Wilsons of not paying.
- The problems with the Wilsonsâ€™ account had occurred because LPS failed to log their bankruptcy into the system.
- Option Oneâ€™s lawyers initially did not tell LPS that the debtorâ€™s claimed to have made all bankruptcy payments.
- Although the affidavit signed by Ms. Goebel referred to attachments thereto, there are never any attachments to such affidavits, and she never verifies the truthfulness of any affidavit she signs. She merely compares the numbers on a page with numbers on a computer screen. She does not review any information in the loan file, even if it is available.
- Ms. Goebel signs dozens of affidavits per day, spending about five minutes on each file.
- Even if Ms. Goebel knew the information contained in the affidavit were patently false, she would have signed it anyway because an attorney created it.
- Ms. Goebel followed the procedures in place at LPS. In other words, every single affidavit executed within the walls of LPS is just as false as the one filed in the Wilson case.
Judge Magner summarized her outrage as follows:
Default affidavits are a lenderâ€™s representation as to the status of a loan. They are routinely accepted in both state and federal courts in lieu of live testimony. They are an accommodation to the lending community based on a belief by the courts that the facts they present are virtually unassailable. The submission of evidence by affidavit allows lenders to save countless hours and expense establishing a borrowerâ€™s default without the need for testimony from a lending representative. While they can be refuted by a borrower, too often, a debtorâ€™s offer of alternative and conflicting facts is dismissed by those who believe that a lenderâ€™s word is more credible than that of a debtor. The deference afforded the lending community has resulted in an abuse of trust. [Emphasis added.]
To the millions of homeowners with mortgage foreclosure cases (past and future) involving LPS, Judge Magnerâ€™s Memorandum Opinion, is absolutely priceless. Hopefully, state court judges presiding over foreclosure cases will keep a worn, dog-eared copy of this opinion close at hand.
And hopefully, LPS days are numbered.
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