Things are heating up for Lender Process…

Things are heating up for Lender Processing Services…here are a couple articles detailing how bad LPS is losing in the courts.  First, from David Foster of Height Analytics:

As background, this involves The Wilsons (homeowner), LPS, and OptionOne.  Fidelity is part of LPS, Cash and Goebel represent LPS, Simmons and Boles represent OptionOne.  The court asked the US Trustee, an arm of the DOJ attached to bankruptcy courts, to study the proceedings after they had become rather contentious.

Below are the most interesting sections  – these are the judges words, not mine:

The Court’s Judgement: The fraud perpetrated on the Court, Debtors, and trustee would be shocking if this Court had less experience concerning the conduct of mortgage servicers. One too many times, this Court has been witness to the shoddy practices and sloppy accountings of the mortgage service industry. With each revelation, one hopes that the bottom of the barrel has been reached.

Comments and Findings of note –
Conflicting Testimony: The testimony presented by Option One, however, did not agree with Mr. Cash or Ms.Goebel’s representations.  The obvious conflict between the testimony of Mr. Simmons and Ms. Goebel and representations by counsel for LPS led the Court to accept the UST’s offer for assistance.  On May 21, 2010, the UST filed a Motion for Sanctions against LPS and Boles.

Affidavit Issues: As part of its default services, LPS executed Affidavits of Default in support of Motions for Relief from Stay. LPS testified that it was just one of the services that LPS provided to clients.  The affidavit is typical. It purports to be executed under oath before a notary and two (2) witnesses. It provides the name and title of the affiant and represents that the affiant has personal knowledge of the facts contained in the affidavit.   In fact, it is a sham.

Lack of Training: Ms. Goebel’s training on the seriousness of her task was sorely lacking.
She described her task as “clerical”95    and repeatedly expressed the belief that the affidavits were counsel’s affidavits, and therefore, she  relied upon counsel regarding their accuracy.96  In this admission, the real problem surfaces.

Bank Abuse of Courts/Affidavits:
The abuse begins with a title. In this case, Ms. Goebel was cloaked with the position of
“Assistant Secretary,” in a purposeful attempt to convey an experience level and importance beyond her actual abilities. Ms. Goebel is an earnest young woman, but with no training or experience in banking or lending. By her own account, she has rocketed through the LPS hierarchy receiving promotions at a pace of one (1) promotion per six (6) to eight (8) month period.97 Her ability to slavishly adhere to LPS’ procedures has not only been rewarded, but has assured the development of her tunnel vision.

LPS Negligence: Ms. Goebel does not understand the importance of her duties, and LPS failed to provide her with the tools to question the information to which she attests. It is evident that the training provided Ms. Goebel by LPS was insufficient and negligent.

And from Yves Smith at NakedCapitalism (I recommend reading the whole post):

A ruling in a Louisiana bankruptcy court case, In re Wilson, provides compelling evidence that many of the assertions made by Lender Processing Services, which both acts as the servicing platform and provider of default services for mortgage services industry, about how limited its role and hence its legal liability is, simply do not comport with reality.

In very simple terms, LPS claims that it is simply a hub, acting as a middleman of sorts between servicers, borrowers, and law firms, providing “information services” of various sorts. Some pending lawsuits, including one launched as a class action in bankruptcy (Federal) court in Mississippi, contend that LPS has been engaging in impermissible splitting of legal fees (which is subject to disgorgement) as well as charing fees that have not been disclosed to the court (a huge no-no in bankruptcy court, where every disbursement is required to be reported). The Chapter 13 bankruptcy trustee for Northern Mississippi has joined that case, both in her own name and on behalf of all Chapter 13 bankruptcy trustees as a class.

…

The court not only deemed an LPS’s affidavit to be a sham and took such a dim view of that as to call into question all banks’ breezy assertions that robosigning is no big deal, it also services to confirm elements of the role LPS plays in mortgage servicing as set forth in pending litigation. We’ve long been of the view that LPS’s role in the mortgage mess is far from innocent, and the tidbits coming out over time continue to bear out our suspicions.

I don’t know the timing of this short trade, but my confidence and conviction grow as the truth about LPS’s business practices come to light.