CARSON CITY, Nev. (Legal Newsline) - Nevada Attorney General Catherine Cortez Masto announced a lawsuit on Friday against a loan processing company for allegedly engaging in deceptive practices against Nevada consumers.
Lender Processing Services, however, says none of its customers have been harmed by any of its actions and that its attempts to cooperate with Masto's investigation was harmed when she hired private attorneys.
The lawsuit was filed Thursday in the 8th Judicial District of Nevada and alleges that LPS participated in widespread document execution fraud, made deceptive statements about efforts to correct document fraud, had improper control over the foreclosure process including foreclosure attorneys, made misrepresentations about its fees and services and made an overall press for speed and volume preventing the necessary and proper focus on integrity and accuracy in the foreclosure process.
"The robo-signing crisis in Nevada has been fueled by two main problems: chaos and speed," Masto said. "We will protect the integrity of the foreclosure process. This lawsuit is the next, logical step in holding the key players in the foreclosure fraud crisis accountable."
LPS said in a statement that it cooperated with Masto's office during a 14-month investigation.
"Unfortunately, the company's efforts to engage in meaningful discussions with the Nevada Attorney General's office have been frustrated by the Nevada Attorney General's decision to outsource its investigation to Cohen Milstein Sellers & Toll PLLC, a plaintiff's law firm located in Washington, D.C., in apparent violation of Nevada law," the company says.
"The complaint highlights misconceptions about LPS and seeks to sensationalize a variety of false allegations in a misleading manner."
Earlier this month, Masto and California Attorney General Kamala Harris began an alliance to examine misconduct and fraud in the mortgage industry. Harris withdrew her support from a nationwide settlement between Iowa Attorney General Tom Miller and top mortgage servicers like Bank of America, Ally Financial, JP Morgan Chase and Wells Fargo. In August, Masto had also expressed concern with the process.
The mortgage foreclosure probe started in October 2010 with inquiries into "robo-signing" practices by several mortgage companies and has broadened into identifying and addressing additional alleged improper foreclosure practices.
Masto's lawsuit against LPS alleges that the company engaged in a pattern and practice of forging, falsifying and/or fraudulently
executing foreclosure related documents, which resulted in countless foreclosures that were predicated upon incomplete documentation, fraudulently notarized documents without making sure that the notary did so in the presence of the person who was signing the document and made it a requirement that employees execute and/or notarize up to 4,000 foreclosure related documents every day.
In addition, the lawsuit alleges that LPS implemented a pervasive scheme to forge signatures on key documents, to make certain that speed and volume quotas were met, improperly controlled and/or directed the work of foreclosure attorneys by imposing arbitrary and inappropriate deadlines that forced attorneys to work through foreclosures at a rate that sacrificed accuracy for speed, concealed the severity and scope of the document execution fraud by misrepresenting that the problems were limited to clerical errors, improperly blocked communication between foreclosure attorneys and their clients and demanded a referral fee/kickback from foreclosure firms for each case referred to the firm by LPS allowing this fee to be misrepresented as "attorney's fees" on invoices passed on to consumers of Nevada and/or submitted to Nevada courts.
The misconduct by LPS was confirmed through testimony of former employees, interviews of servicers and other players in the industry as well as an extensive review of more than 1 million pages of relevant documents, Masto says. Former LPS employees and industry players allegedly described the company as an assembly-line sweatshop in which documents and foreclosures are churned out as fast as new requests came in. The company also allegedly punished network attorneys who failed to keep up the pace. LPS is the nation's largest provider of default mortgage services, processing over 50 percent of all foreclosures annually.
Mastro's office recently indicted Gerri Sheppard and Gary Trafford as part of a criminal inquiry into the conduct of an alleged robo-signing scheme that she says resulted in the filing of tens of thousands of fraudulent documents between 2005-2008 with the Clark County Recorder's Office.