LPS in Robo-Signing Deal Talks Said to Exceed $200 Million
Lender Processing Services Inc. (LPS) is in talks with regulators that could lead to a settlement of more than $200 million over improper and fraudulent foreclosure paperwork after the 2008 credit crisis, according to people briefed on the discussions.
The deal would resolve claims that LPS falsified documents related to home seizures, including through “robo-signing.” The Federal Reserve, Federal Deposit Insurance Corp. and Office of the Comptroller of the Currency have discussed directing at least some of the money to homeowners, said two people who spoke on condition of anonymity because the matter is private.
LPS, a mortgage-processing firm whose biggest customers have been Wells Fargo & Co. (WFC) and JPMorgan Chase & Co. (JPM), previously settled similar matters with the Justice Department and almost every U.S. state. The Jacksonville, Florida-based company is one of the few in a group accused of foreclosure misdeeds that hasn’t made a final deal with bank regulators.
Mitch Cohen, a spokesman for LPS, declined to comment. Todd C. Johnson, LPS’s executive vice president and general counsel, didn’t respond to requests for comment. Bryan Hubbard, a spokesman for the OCC, David Barr, an FDIC spokesman, and Barbara Hagenbaugh, a Fed spokeswoman, also declined to comment.
In January, LPS agreed to pay $127 million in a settlement with 46 states. Illinois Attorney General Lisa Madigan characterized LPS as a “document factory, literally rubber-stamping thousands of foreclosures with no regard to fairness and accuracy.”
The Justice Department in February announced a separate $35 million in criminal penalties and forfeiture against LPS, saying in a news release that the company participated in “a six-year scheme to prepare and file more than 1 million fraudulently signed and notarized mortgage-related documents.”
Lorraine Brown, former chief executive officer of LPS’s DocX LLC subsidiary, is serving at least 40 months in prison after pleading guilty last year in federal court to conspiracy to commit mail and wire fraud.
The new settlement discussions arise from 2011 agreements between the U.S. and the mortgage-service industry. Under the deals, outside consultants began examining 2009 and 2010 foreclosures and flagging problem files so that wronged borrowers could be compensated. Instead, a year and a half into the process, borrowers weren’t getting payments and the bill from consultants approached $2 billion.
Regulators decided to scrap the plan for a $10 billion overall settlement that would get cash to people quickly -- even if they hadn’t been wronged in their foreclosures.
The biggest servicers agreed to the largest payouts in the settlement, including $2.9 billion from Bank of America Corp. and $2 billion from JPMorgan. If the LPS settlement with regulators exceeds $200 million, it would be on par with HSBC Holdings Plc (HSBA), which settled claims for $249 million, and GMAC Mortgage, part of the home-lending unit owned by Ally Financial Inc., which paid $230 million.
In a related settlement announced yesterday with the Consumer Financial Protection Bureau and 49 states, Ocwen Financial Corp. (OCN), the biggest non-bank U.S. mortgage servicer, agreed to spend $2.1 billion on foreclosure compensation and “principal forgiveness modification programs” for people behind on payments or whose homes are worth less than they owe.
LPS continues to provide mortgage data and process loan documents for the industry. In announcing its February non-prosecution agreement, the Justice Department said LPS had cooperated with the government’s investigation and had worked to fix flaws in its operations and management.
Revenue at the company slid from $2.5 billion in 2010 to $2 billion last year. In October, it reported third-quarter net income of $35.5 million, down from $58.3 million in the year-earlier period. President and CEO Hugh Harris said in a statement then that the company has continued to adjust to “declining foreclosure activity.”
Fidelity National Financial Inc. (FNF), the biggest U.S. title insurer, agreed in May to reacquire LPS for about $2.9 billion in cash and stock, five years after spinning off the company just as the 2008 credit crisis was emerging.
LPS announced yesterday that its shareholders voted to approve the merger agreement and that the transaction was expected to close “at or around the end of 2013.”
Daniel K. Murphy, Fidelity National’s senior vice president and treasurer, didn’t immediately respond to a request today for comment on the acquisition.
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