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LPS Agrees to Multi-state Settlement

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A settlement announced between Lender Processing Services Inc. and most state attorneys general resolves allegations of robo-signing by a now-defunct subsidiary. LPS also settled two other lawsuits.

The Jacksonville, Fla.-based service provider said Thursday that it agreed to settlements with attorneys general from 46 states and the District of Columbia. In addition to payments being made to the states, LPS committed to stronger compliance and oversight of its operations as well as continued remediation efforts.

The agreements follow similar settlements previously announced with the states of Colorado, Delaware and Missouri.

Only Nevada remains unresolved.

LPS said it will pay an aggregate of $127 million to resolve “inquiries surrounding the company’s default operations, including former document preparation, verification, signing and notarization practices of certain operations.”

The former document preparation unit is DocX LLC, a company founded in the 1990’s by Lorraine Brown that was acquired in September 2005 by former LPS-parent Fidelity National Financial Inc. then shut down in May 2010.

Problems came to light when attorney Lynn Szymoniak appeared on 60 Minutes in April 2011 to discuss how her own forensic investigation had uncovered signatures that were forged on behalf of Linda Green of DocX. Szymoniak, herself, was facing foreclosure on a $780,000 loan she obtained in 2006 from Option One Mortgage Corp. She filed a lawsuit under the whistleblower provision of the False Claims Act, 31 U.S.C. § 3729, and was expected to receive $18 million as part of the massive multi-state servicer settlement reached a year ago.

The LPS settlement with Missouri Attorney General Chris Koster was reached on Aug. 2, 2012, for $2 million. Koster had filed a criminal indictment against DocX on Feb. 6, 2012, “charging various counts of forgery and false certification,” according to an LPS filing with the Securities and Exchange Commission. The criminal charges were dropped against DocX as part of the settlement.

However Brown, the former chief executive officer of DocX, agreed to a plea bargain with Missouri’s attorney general on Nov. 20, 2012, involving a two-year sentence. On the same day, she also pled guilty to robo-signing charges in U.S. District Court for the Middle District of Florida.

Former LPS employees Gary Trafford and Gerri Sheppard were indicted in November 2011 by a Clark County, Nev., grand jury over charges of robo-signing thousands of foreclosure documents. Trafford and Sheppard allegedly had employees in Nevada prepare notices of default then directed them to forge names and falsely notarize documents. Employees were secretly told to file the forged documents with the county recorders offices.

In today’s announcement, LPS additionally disclosed a settlement in securities fraud litigation filed by St. Clair Shores General Employees’ Retirement System. The lawsuit was originally filed in on Nov. 23, 2010. The deal is subject to entry of a final order by the federal district court.

Another settlement was reached last month in litigation filed by American Home Mortgage Servicing Inc. That complaint was filed on Aug. 23, 2011, in District Court for Dallas County, Texas, by American Home — which changed its name to Homeward Residential Holdings Inc. and was acquired by Ocwen Financial Corp. in December — and alleged negligence and breach of contract by DocX in connection with document execution and recording service.

“Today’s settlements are another major step toward putting issues related to past business practices behind us,” LPS President and Chief Executive Officer Hugh Harris said in the announcement.

The litigation activity prompted LPS to boost its legal and regulatory reserves by $48 million in the fourth quarter to $223 million.

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