When Banks Outsource Foreclosures, Nothing Good Happens


Lender Processing Service (LPS), is “the nation’s leading provider” of “default solutions” to mortgage servicers, meaning it manages every aspect of foreclosure, whether in bankruptcy or state court. However, LPS is facing investigations and lawsuits that challenge its existence because they focus on the legality of LPS’s basic business model.

It’s a Louisiana bankruptcy case involving a single foreclosure that best illustrates the problems with the banks’ outsourcing their mortgage default work to LPS or similar entities. During a bankruptcy, foreclosure is forbidden without the judge’s permission, so LPS is frequently involved in seeking that permission.

In that Lousiana case, involving the bankruptcy of Ron and La Rhonda Wilson, LPS is facing sanctions for allegedly committing perjury during a hearing held to find out why the bank — Option One — twice asked the bankruptcy court for permission to foreclose when the debtors were current on their mortgage. LPS insists it did not intend to mislead the court.

A Disturbing Picture

Although the U.S. Bankruptcy Trustee, which is the party asking for the sanctions, seems to have the stronger case if you read the motions at those links, the perjury issue isn’t central to my point here. In the detailed proceedings triggered by the wrongful requests to foreclose, a disturbing picture emerges of a thoroughly dysfunctional “legal” process between mortgage servicers and their LPS-network attorneys. As a result of that process — adopted by servicers to save themselves money — everyone else winds up paying.

See full article from DailyFinance: http://srph.it/dS31zH