Florida Gets $8.6 Million in New $120 Million National Robo-Signing Settlement with Lender Processing Services

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This morning, Florida's Attorney General Pam Bondi announced that Florida - along with another 45 state Attorneys General have made a bargain with Lender Processing Services, Inc. (LPS) which ends the investigations in "robosigning" of real estate documents by LPS and its subsidiaries, LPS Default Solutions and DocX, with a settlement involving LPS paying millions in settlement proceeds and the entry of a consent judgment by each Attorney General in their state's case against the mortgage servicer.

LPS is based in Jacksonville, and moved into the national spotlight early on in the Foreclosure Housing Crisis: for details, check out our earlier post "Defining RoboSigning: What Exactly is Robosigning - and Why is Everyone So Upset About It?" LPS is a national leader in real estate financing in this country, and has been for years. Its primary service is technological: it helps banks and mortgage servicing companies with all the paperwork and documentation in real estate transactions, and for this reason it became caught up in the ForeclosureGate scandal involving "robosigned" documents.

The consent judgment will provide for new measures to be implemented by LPS in its documentation services. For Florida, that judgment will also bring with it millions of dollars in settlement proceeds to the State of Florida.

“This settlement reflects the efforts of the states to work together to remedy the widespread abuses occurring in the residential mortgage industry in the past few years,” stated Attorney General Pam Bondi. “The proposed judgment holds LPS and its subsidiaries accountable and requires reforms that ensure the proper handling of residential mortgage-related documents.”

Meanwhile, LPS has also issued a news release this morning. However, while an announcement will surely be coming regarding this national settlement, today's news from LPS looks to the future, which LPS believes to be sunny. According to LPS Applied Analytics Senior Vice President Herb Blecher:

“Though still a long way off from the historic level of originations that preceded the mortgage crisis, 2012 was the strongest full year of originations we’ve seen since 2007,” Blecher said. “Volumes were up approximately 34 percent year over year, with about 8.6 million new loans originated. And, while the majority of these new loans were government-backed – 84 percent in 2012 as compared to just over 50 percent at the peak – the trend over the last four years does suggest a slowly resurgent non-agency lending market.”

From Bondi's release, here are the changes that LPS will be required to make, some of which we can assume will have costs passed on to LPS's banking clientele:

  • 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 services;
  • 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.

The states that are in agreement here, and sharing the $120 million settlement proceeds: Florida, Alabama, Alaska, Arizona, Arkansas, California, Connecticut, Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Minnesota, Mississippi, Montana, Nebraska, New Hampshire, New Jersey, New Mexico, New York, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee, Texas, Utah, Vermont, Virginia, Washington, West Virginia, Wisconsin, Wyoming, and the District of Columbia.