Office of the Attorney General
Attorney General Conway Announces $120 Million Multi-state Settlement with Lender Processing Services, Inc.
Attorney General Jack Conway today announced that he has joined 44 other Attorneys General in reaching a $120 million multi-state settlement with Lender Processing Services, Inc. (LPS) and its subsidiaries LPS Default Solutions and DocX over allegations of misconduct related to mortgage loan default services. The lawsuit and proposed consent judgment will be filed today in Franklin Circuit Court.
The proposed consent judgment resolves allegations that the Jacksonville, Fla. based company "robo-signed" documents and engaged in other improper conduct related to the mortgage loan default services it provided to banks and mortgage loan servicers. Under the settlement, LPS and its subsidiaries would be required to reform their business practices and, if necessary, correct documents they executed to assist homeowners. Kentucky's share of the settlement is approximately $949,000.
"This settlement is yet another step in holding the nation's largest banks and mortgage servicers accountable for a crisis that has hurt families and communities across Kentucky and the nation," General Conway said. "It also ensures increased oversight and better protection for consumers against the shoddy and unlawful practices that created the mortgage foreclosure crisis."
Among other things, the consent judgment will require proper execution of documents and prohibit signature by unauthorized persons or those without first-hand knowledge of facts attested to in the documents, enhanced oversight of the default services provided, and a review of all third-party fees to ensure that the fees have been earned and are reasonable and accurate.
Additional Settlement Highlights:
- Prohibits LPS (including DOCX) from engaging in the practice of surrogate signing of documents;
- Ensures that LPS has proper authority to sign documents on behalf of a servicer, if in fact it is signing documents;
- Requires LPS to accurately identify the authority that the signer has to execute the document and where that signer works;
- Prohibits LPS from notarizing documents outside the presence of a notary and ensures that notarizations will comply with applicable laws;
- Prohibits LPS from improperly interfering with the attorney-client relationship between attorneys and servicers;
- Prohibits LPS from incentivizing or promoting attorney speed or volume to the detriment of accuracy;
- Requires LPS to ensure that foreclosure and bankruptcy counsel or trustees can communicate directly with the servicer;
- Requires LPS to have enhanced oversight and review of processes over third parties it manages, including those entities that perform property preservation services;
- Prohibits LPS from imposing unreasonable mark-ups or other fees on third party providers' default or foreclosure-related services;
- Requires LPS to establish and maintain a toll-free phone number for consumers concerning document execution and property preservation services (including winterization, inspection, preservation, and maintenance); and
- Requires LPS to modify mortgage documents that require remediation when LPS has legal authority to do so and when reasonably necessary to assist a consumer or when required by state or local laws.
In the proposed settlement, LPS admitted to important facts uncovered in the investigation, including the practice by DocX of so-called "surrogate signing," the signing of documents by an unauthorized person in the name of another and notarizing those documents as if they had been signed by the proper person, as well as other improprieties in the document execution and recordation or filing process.
Once the judgment is entered by the courts, LPS will undertake a review of documents executed during the period of January 1, 2008 to December 31, 2010 to determine what documents, if any, need to be re-executed or corrected. If LPS is authorized to make the corrections, it will do so and will make periodic reports to the Attorney General of the status of its review and/or modification of documents. Consumers may also call the LPS toll-free number, once it is established, and request review and correction of any documents executed by LPS at any time.
General Conway's Efforts to Protect Struggling Kentucky Homeowners
In addition to participating in the multi-state settlement with LPS, General Conway filed suit earlier this month against the Mortgage Electronic Registration Systems, Inc. (MERS) for violating Kentucky law by not recording mortgage assignments with County Clerks when mortgages were sold or transferred from one bank to another. Additionally, the lawsuit alleges that since MERS' creation in 1995, members have avoided paying more than $2 billion in recording fees nationwide.
Last year, General Conway joined 48 other state Attorneys General in negotiating the historic $25 billion national mortgage foreclosure settlement. The Attorneys General uncovered that the nation's five largest banks had been committing fraud during some foreclosures by filing "robo-signed" documents with the courts.
Kentucky's share of the settlement totals almost $58 million. Thirty-eight million dollars is being allocated by the settlement administrator to consumers who qualify for refinancing, loan write downs, debt restructuring and/or cash payments of up to $2,000. To date, the banks report providing more than $33 million in relief to 944 Kentucky homeowners. The average borrower received more than $35,000 in assistance.
Kentucky also received $19.2 million in hard dollars from the banks. The money went to agencies that create affordable housing, provide relief or legal assistance to homeowners facing foreclosure, redevelop foreclosed properties and reduce blight created by vacant properties.
To learn more about the settlement, visit ag.ky.gov/mortgagesettlement.