May 27th, 2011 7:16 AM by Lehel S.
California Atty. Gen. Kamala D. Harris is investigating an obscure Florida firm that processes foreclosures for many of the nation's major financial institutions, as she intensifies her examination of repossession practices in the Golden State.
The state's top law enforcement officer subpoenaed Lender Processing Services Inc. of Jacksonville, Fla., a company that handles loans in default on behalf of several major banks. The subpoena requires LPS to produce documents and provide written answers to questions from the attorney general's office by June 24.
As part of an investigation into so-called robo-signing, Harris said she was investigating whether employees of the company fraudulently signed key foreclosure documents in California. LPS processes more than 50% of all mortgages in the United States and has contracts with more than 80 financial institutions, she said.
The robo-signing scandal erupted late last year when several banks admitted to employing people who improperly signed documents used in foreclosures. Much of the evidence surrounding robo-signing has been uncovered in states where courts oversee the process and require significant paperwork when a lender seizes a home; California foreclosures occur largely outside the courtroom.
But Wednesday, Harris emphasized that California homeowners may have fallen victim to robo-signers who didn't verify the accuracy of the documents they were putting their names on and, in some cases, failed even to read the documents. Often, individuals signed thousands of times a day, she said.
"California homeowners have been exposed to fraud and crime at every step of the mortgage process," Harris said. "Justice demands we come to their aid, and a key step in that is to investigate robo-signing and the potential for inaccurate or unjust foreclosures."
Harris' actions came as state attorneys general across the country increase pressure on the mortgage industry. Illinois Atty. Gen. Lisa Madigan also said Wednesday that she was issuing subpoenas to LPS as well as another foreclosure processing company in Florida, Nationwide Title Clearing Inc., in connection with the robo-signing scandal.
LPS didn't respond to requests for comment. Nationwide Title Clearing said it hadn't received the subpoena and therefore couldn't comment on the specifics but added: "The company stands behind their mortgage assignment documents and procedures, which have been thoroughly audited and examined for accuracy."
In addition, Connecticut Atty. Gen. George Jepsen said Wednesday that Bank of America Corp. needs to devote more resources to help troubled borrowers in that state who are seeking loan modifications.
And New York Atty. Gen. Eric Schneiderman is examining the mortgage practices of several Wall Street players and the packaging and sale of loans to investors.
At a meeting Tuesday in Washington, a coalition of state attorneys general and federal agencies warned the nation's top five mortgage servicers that they could face at least $17 billion in civil lawsuits if a settlement is not reached related to alleged foreclosure improprieties, a person familiar with the matter said Wednesday.
The figure — which was initially reported Tuesday night by the Wall Street Journal — does not include billions of dollars in potential claims from federal agencies, according to the person, who asked not to be named because negotiations were continuing. The five banks are BofA, JPMorganChase & Co., Wells Fargo & Co., Citigroup Inc. and Ally Financial Inc.
Although courts in California do not oversee the foreclosure process, certain key legal documents are necessary to take back a home. One such document is the notice of default, which initiates the foreclosure process and must be notarized and then filed at county recorders' offices. Another key document necessary for foreclosure is the assignment of the deed of trust, the legal term for a mortgage, which proves that a financial institution has the right to foreclose.
LPS was used by many of the largest mortgage lenders and servicers in the country, and former LPS employees have testified that documents were robo-signed there, Harris said in a statement Wednesday. The company has several offices in California.
"All the states are facing a similar issue: whether questionable practices were used to prepare, sign and notarize official foreclosure documents," said Frances Grunder, senior assistant California attorney general. "In California, foreclosure information must be accurate, verified and properly notarized because these documents are used to foreclose on people's homes. The issue is whether those laws were followed here."
In her statement, Harris warned that the risks posed by robo-signing are "particularly dangerous" in non-judicial foreclosure states such as California, as there is no judicial oversight of the process.