Fidelity National Unit Said to Near Settlement Over Robo-Signingby
Regulators seeking $65 million in discussions with former LPS
LPS was acquired during five-year talks over foreclosure flaws
A Fidelity National Financial Inc. subsidiary is in final talks to pay as much as $65 million to resolve U.S. government accusations that it contributed to improper and fraudulent foreclosures after the 2008 credit crisis, according to a person familiar with the deal.
Federal banking regulators agreed that a $65 million penalty could settle the case involving so-called robo-signing of foreclosure papers tied to the firm formerly known as Lender Processing Services Inc., according to the person, who requested anonymity because the negotiations aren’t public. Fidelity National acquired the company during the lengthy settlement talks with the Federal Reserve and other agencies, and it has been divided among subsidiaries including ServiceLink Holdings and Black Knight Financial Services.
LPS, which provided technology and services to lenders such as Wells Fargo & Co. and JPMorgan Chase & Co., faced accusations that it filed fraudulent legal documents used in the repossession of homes. For more than five years, LPS has been ensnared by a 2011 order from the Fed, Office of the Comptroller of the Currency and Federal Deposit Insurance Corp. requiring changes to how it deals with loan defaults and the hiring of an outside firm to examine its work from 2008 through 2010.
Fidelity National’s ServiceLink subsidiary is primarily on the hook for the new settlement, according to company disclosures. The expected accord and fine would free that LPS successor from the 2011 order. Black Knight, which absorbed much of LPS’s old business and is spinning off from Fidelity National, is shielded from the fine through an agreement with ServiceLink.
ServiceLink has been negotiating with regulators over a probable penalty, but the sides hadn’t yet agreed on an amount, the company said in a regulatory filing last month. ServiceLink had recently beefed up its loss contingencies to $60 million, it said in the quarterly earnings report. Wells Fargo paid $70 million in a similar agreement this year.
Fidelity National, the biggest U.S. title insurer, declined to comment on the settlement discussions. Spokesmen for the three bank regulators also declined to comment.
Earlier in the talks, regulators had sought more than $200 million and weighed whether some money could be directed to help borrowers. It’s unclear how the number being discussed dropped to about a third of that, but agency settlements are often affected by a firm’s level of cooperation and ability to pay.
Before Fidelity National acquired the Jacksonville, Florida-based company in 2014, LPS had already settled with dozens of states for $127 million. It paid another $35 million to resolve a Justice Department inquiry in which it was said to have been involved 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, spent more than three years in prison after pleading guilty in federal court to conspiracy to commit mail and wire fraud. Brown, who was released on parole Aug. 31, was accused by Michigan Attorney General Bill Schuette of establishing “a widespread scheme of ‘robo-signing,’ a practice in which employees were directed to fraudulently sign another authorized person’s name on mortgage documents in order to execute these documents as quickly as possible.”