Bankster Lawsuit Tags Foreclosure Document Sweatshop; Servicer Says 'We Only OK'd Use Of Robosigners, Not Sub-Robosigners!'

The Wall Street Journal reports:

• One of the nation's largest mortgage servicers filed a lawsuit on Tuesday against Lender Processing Services Inc., a top mortgage industry technology and services vendor, alleging that the firm improperly signed mortgage documents on its behalf and triggered millions of dollars in legal expenses as a result.



• American Home Mortgage Servicing Inc. said in the lawsuit that it had incorrectly processed more than 30,000 mortgage assignments when seeking foreclosure on properties in all 50 states as a result of the work by an LPS subsidiary.



• The lawsuit was filed Tuesday in a state court in Dallas County, Texas, and seeks unspecified damages worth millions of dollars. LPS, based in Jacksonville, Fla., does business with many of the nation's largest mortgage servicers.

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• American Home alleged in the lawsuit that LPS didn't dispute that it had improperly executed, notarized, and recorded thousands of assignments that American Home used to process foreclosures. But American Home said that LPS has refused to indemnify the servicer for millions of damages that resulted from the shoddy work by arguing that it wasn't under an enforceable contract when the breaches occurred.

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• Tuesday's lawsuit is one of the first by a servicer to attempt to put back losses for certain document-handling improprieties on an outside vendor. It concerns the use of "surrogate signers," or employees that weren't authorized to sign documents on behalf of the company.



• American Home designated certain LPS employees as "special officers" [ie. robosigners] of the company in 2009 to process certain foreclosures, according to the lawsuit. But American Home said that LPS then allowed other unauthorized employees to sign the names of the approved "special officers" on foreclosure filings [ie. sub-robosigners]. The company also alleged that LPS had proposed steps that would have retroactively allowed the improper signatures.

For more, see American Home Mortgage Files 'Robo-Signing' Suit (requires subscription; if no subscription, TRY HERE, or GO HERE - then click appropriate link for the story).