Monday, April 5, 2010

WSJ On Feds' Probe Into LPS' "Docx" Sub; Allegations Of Creation Of Bogus Paperwork & Dubious Notarizations In Foreclosure Actions Under The Spotlight

The Wall Street Journal reports:

  • A subsidiary of a company that is a top provider of the documentation used by banks in the foreclosure process is under investigation by federal prosecutors. The prosecutors are "reviewing the business processes" of the subsidiary of Lender Processing Services Inc., based in Jacksonville, Fla., according to the company's annual securities filing released in February. People familiar with the matter say the probe is criminal in nature. Michelle Kersch, an LPS spokeswoman, said the subsidiary being investigated is Docx LLC. Docx processes and sometimes produces documents needed by banks to prove they own the mortgages.

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  • The case follows on the dismissal of numerous foreclosure cases in which judges across the U.S. have found that the materials banks had submitted to support their claims were wrong. Faulty bank paperwork has been an issue in foreclosure proceedings since the housing crisis took hold a few years ago. It is often difficult to pin down who the real owner of a mortgage is, thanks to the complexity of the mortgage market.

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  • Diana Adams, a U.S. government lawyer who monitors bankruptcy courts, argued in a brief filed earlier this year in [a] case that an LPS employee signed a document that wrongly said J.P. Morgan Chase & Co. had owned [the subject] loan. Documents related to the loan were "patently false or misleading," according to Ms. Adams's court papers. J.P. Morgan Chase, which has withdrawn its request to foreclose, declined to comment.

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  • Some lawyers representing homeowners have claimed that banks routinely file erroneous paperwork showing they have a right to foreclose when they don't. Firms that process the paperwork are either "producing so many documents per day that nobody is reviewing anything, even to make sure they have the names right, or you've got some massive software problem," said O. Max Gardner, a consumer-bankruptcy attorney in Shelby N.C., who has defended clients against foreclosure actions.

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  • LPS has acknowledged problems in its paperwork. In its annual securities filing, in which it disclosed the federal probe, the company said it had found "an error" in how Docx handled notarization of some documents. Docx also has processed documents used in courts that incorrectly claimed an entity called "Bogus Assignee" was the owner of the loan, according to documents reviewed by The Wall Street Journal.(1)(2)

For the story, see U.S. Probes Foreclosure-Data Provider (Lender Processing Services Unit Draws Inquiry Over the Steps That Led to Faulty Bank Paperwork).

(1) For examples of "Bogus Assignee" loan assignments, see

(2) For more in connection with the alleged manufacturing of phony documents in foreclosure actions, and dubious notarizations in connection therewith, see:

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