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American Home Sues over Robo-Signing

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“Millions of dollars” are being sought in a lawsuit filed by American Home Mortgage Servicing Inc. Allegations of robo-signing are at issue it the case, which is one of several being fought by the defendant.

The lawsuit was filed Tuesday in District Court in Dallas County, Texas, American Home announced.

Defendants named in the case are Lender Processing Services Inc. and affiliate DocX LLC, according to American Home — which said it only resorted to litigation after more than a year of unsuccessful discussions.

The Coppell, Texas-based servicer claims that it has lost millions of dollars because of “LPS and DocX’s improper execution, notarization, and recording of assignments of mortgage affecting more than 30,000 residential mortgages across the country.” The alleged actions occurred between April 2008 and November 2009.

While American Home’s board of directors appointed certain DocX and LPS employees as special officers empowered to execute mortgage-related documents — American Home claims that the defendants admitted in November 2009 that they had started using “surrogate signers” instead of the designated officers.

“Upon learning of this unauthorized use of surrogates, we terminated the services of DocX and promptly conducted an extensive, 50-state remediation effort to address any issues caused by this problem,” American Home Chief Legal Officer Jordan Dorchuck said in the news release.

For its part, LPS said in a statement that it immediately notified American Home as soon as it discovered the practices going on at DocX and halted further actions. It also voluntarily reviewed and remediated mortgage assignments impacted by the practice.

LPS claims that it offered to reimburse American Home for the expense of evaluation and re-recording of the remediated assignments. It also offered to discuss additional claims, but American Home allegedly refused to document losses.

“LPS remains ready to review any demands made by AHMSI to the extent AHMSI is willing to provide evidence supporting those claims,” the statement said. “Notwithstanding LPS’s willingness to resolve these issues amicably, LPS disagrees with the allegations contained in the complaint and is prepared to vigorously defend against them.”

American Home, which claims to be the 15th-biggest mortgage servicer in the country, hopes to have its amended contract declared binding as a result of the action. It also seeks an order requiring LPS and DocX to arbitrate American Home’s claims of breach-of-contract and indemnification.

The plaintiff also seeks reimbursement for its losses tied to the defendant’s execution, notarization and recording of improper assignments for American Home.

American Home reports a servicing portfolio of 384,000 mortgages for $72.5 billion.

LPS was already facing a barrage of legal actions.

Its own shareholders alleged violations of the Securities Exchange Act of 1934 in a class action filed late last year in U.S. District Court for the Middle District of Florida.

The company was subpoenaed in May by California Attorney General Kamala D. Harris and that same month by Illinois Attorney General Lisa Madigan. It also faces a criminal investigation launched in June by Michigan Attorney General Bill Schuette.

LPS, DocX and LPS Default Solutions Inc. entered a consent order with federal banking regulators in April.

DocX LLC was acquired by Fidelity National Financial Inc. in September 2005. It was included in a spin-off of LPS by Fidelity National Information Services in July 2008.

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