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In Response, LPS Admits to Robo-Signing Deficiencies for Indicted Ex-Employees

Responding to the indictment of two of its employees in a mass robo-signing scheme, Lender Processing Services, a mortgage document processing company, appeared to admit to flaws in its foreclosure documentation process.

In their statement on the indictment, LPS acknowledged that they were told of an inquiry by Nevada Attorney General Catherine Cortez Masto, and that they were cooperating fully with the investigation. They added:

Earlier this month, the Attorney General’s office confirmed that the company was not a target of this inquiry.

The Nevada Attorney General has elected to charge two Lender Processing Services (NYSE: LPS) employees for document execution and notarization practices related to notices of default and deeds of trust filed in Clark County, Nevada from 2005 to 2008. Based on the company’s reviews, LPS acknowledges the signing procedures on some of these documents were flawed; however, the company also believes these documents were properly authorized and their recording did not result in a wrongful foreclosure.

“I am deeply committed to ensuring that LPS meets rigorous standards of professional conduct and operating excellence,” said newly appointed LPS President and CEO Hugh Harris. “I have full confidence in the ability of our leadership team and more than 8,000 dedicated employees to deliver on that commitment.”

This is pretty stunning. In the boldface part, there is an admission on guilt – on behalf of its employees who are facing life in prison! – with the usual alibi that the deadbeats had it coming anyway, and nobody was wrongly foreclosed as a result.

As for the notion that LPS wasn’t a target of the investigation: that’s true for now. But Masto’s spokeswoman would not confirm or deny any investigation into the executive suite at LPS. And…

A spokeswoman for Masto declined to confirm or deny whether the attorney general’s office is pursuing an investigation into higher-level LPS employees. As for the company’s clients, Kelleher told American Banker, “We simply don’t know if the major banks were aware of what these individuals were doing.” Kelleher added that the state would consider future actions if it were to discover that banks had sanctioned robo-signing.

Of course they would. I don’t think this ends with the midlevel staffers who were operating under orders. Unless you believe they came up with such a scheme on their own, they would have good reason to explain that they were merely carrying out official policy. This is just the first rung on the ladder.

You don’t hear a lot from the other Attorneys General about this case, despite the fact that robo-signing of this type can be easily proven and pinpointed with only a cursory look in registers of deeds’ offices. Iowa AG Tom Miller’s office would only say that “states are free to file criminal cases” like Masto’s against those who committed robo-signing. The obvious follow-up is “what is Tom Miller waiting for,” but I guess he’s too busy trying to give away immunity.

And yet, much like the past year, Miller and his cronies cannot close the deal. We’ve blown past another couple deadlines for the settlement. Kamala Harris, the California AG seen as the linchpin to the deal, hasn’t said a word in public on the settlement since dropping out of the talks. She was last seen today filing subpoenas against Fannie Mae and Freddie Mac:

Investigators with the California attorney general’s office have subpoenaed information from mortgage titans Fannie Mae and Freddie Mac as part of a wide-ranging inquiry into lending and foreclosure practices in the state.

The subpoenas ask the government-controlled finance companies to answer a series of questions about their activities in California, including their roles as landlords who own thousands of foreclosed properties. The attorney general’s office is also seeking details of Fannie and Freddie’s mortgage-servicing and home-repossession practices, according to a person familiar with the matter.

In addition, investigators want to learn more about the companies’ purchases and sponsorship of securities holding “toxic mortgages” in the Golden State, said the person, who was not authorized to speak on the matter and requested anonymity.

This is part of an ongoing effort to get the GSEs to aid underwater borrowers, a major problem in California. But every day that Harris comes out and does something other than return to the settlement talks is a good day. Maybe her next trick will be to take lessons from some of the practices of her neighboring state, Nevada.

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David Dayen

David Dayen

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