Lender Processing Services Inc. has agreed to pay more than $120 million and review three years of documents to settle allegations that the company "robo-signed" and otherwise improperly handled mortgage documents that LPS and its subsidiaries handled for loan servicers in foreclosure proceedings.

The $120.6 million settlement with attorneys general of 46 states and Washington, D.C. requires that LPS review documents executed between Jan. 1, 2008 and Dec. 31, 2010 to determine whether any need to be re-executed or corrected. For the next three years, LPS will be required to provide the attorneys general with quarterly reports of the company’s remediation efforts.

"Today we’ve taken another step forward to hold accountable the many players in the marketplace who contributed to the foreclosure crisis," said Illinois Attorney General Lisa Madigan in a statement Thursday. "LPS and its subsidiaries became a sort of document factory, literally rubber stamping thousands of foreclosures with no regard for fairness and accuracy in the process."

Last year, the nation’s five biggest mortgage loan servicers — Bank of America, Citi, JPMorgan Chase, Wells Fargo and Ally Financial — and 49 state attorneys general reached a $25 billion settlement over robo-signing allegations. Most of that settlement was earmarked for homeowner relief.

In January, 13 servicers facing enforcement actions for alleged deficiencies in loan servicing and foreclosure processing agreed to pay $3.5 billion in cash and $4.5 billion in other assistance to more than 4 million borrowers whose homes were in foreclosure in 2009 and 2010. Critics of the settlements have said they let loan servicers off too easily.

The multistate settlement with LPS prohibits the company and its subsidiaries, LPS Default Solutions and now-defunct DocX, from having employees sign documents in the name of other employees, a practice known as "surrogate signing."

The settlement also prohibits the notarizing of documents without the presence of a notary; improperly interfering with the attorney-client relationship between attorneys and servicers; incentivizing or promoting attorney speed or volume at the cost of accuracy; and imposing unreasonable mark-ups or other fees on third party providers’ default services. 

In November, the former president of DocX, Lorraine Brown, pleaded guilty to state and federal criminal charges related to the robo-signing scandal. In doing so, she admitted her role in a six-year scheme involving more than 1 million fraudulently signed mortgage documents, federal prosecutors said.

According to federal plea documents, beginning in or around 2003 and continuing through November 2009, employees at DocX, under the direction of Brown and others, began forging and falsifying signatures on the mortgage-related documents residential mortgage servicers had hired them to prepare and file with property recorders’ offices throughout the U.S.

Shortly after pleading guilty in those cases, Brown was charged with one count of racketeering in Michigan, a felony that carries a 20-year sentence, according to Michigan Attorney General Bill Schuette.

LPS maintains it was unaware of the surrogate signing practices at DocX until November 2009 and, upon discovery, immediately discontinued the practices, fired Brown and shut down DocX.

The Jacksonville, Fla.-based real estate data and technology company announced Thursday it had reached a separate settlement with the Michigan attorney general for $2.5 million, including an $800,000 reimbursement to the state for attorney fees and costs.

Last year, LPS settled similar cases with Missouri, Colorado and Delaware, agreeing to pay $2 million, $1.8 million, and $250,000, respectively. Nevada is the only state LPS has yet to come to terms with. The state filed suit against the company in December 2011.

"Today’s settlements are another major step toward putting issues related to past business practices behind us," said LPS President and CEO Hugh Harris in a statement Thursday.

Under the settlement, New York will receive about $1.9 million; New Jersey $3.1 million; Florida, about $8.9 million; Connecticut, nearly $1.9 million; Ohio, $2.5 million; Tennessee, about $2.3 million; Maine, about $500,000; and Washington, D.C., $232,505, according to press releases by their respective attorneys general.

The share each receives is based on the revenue LPS and its subsidiaries generated from document preparation services in each state between January 2008 and December 2010.

A state-by-state breakdown of payouts is available on the last page of the settlement. Of the $120.6 million, $7 million will go the thirteen states that lead the probe into LPS’ mortgage practices to cover legal costs. These states are Arizona, California, Connecticut, Florida, Illinois, Iowa, Oregon, New Jersey, North Carolina, Pennsylvania, South Carolina, Texas and Washington.

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