LPS Settles DocX Robo-Signing Litigation with 46 States

Lender Processing Services will pay an aggregated sum of $127 million to resolve suits with 46 states and the District of Columbia arising out of activities of its former subsidiary DocX LLC.  The company previously announced settlements with three other states, leaving a complaint filed by the Attorney General of Nevada as the only unresolved issue.  In addition to the cash LPS confirmed its ongoing commitment to stronger compliance and oversight of its operations - and to continue its remediation efforts. 

The complaints alleged that DocX implemented what the U.S. Justice Department, in a related action, called a six-year scheme to prepare and file more than 1 million improper mortgage documents.  The former CEO of DocX, Lorraine Brown, pled guilty in federal court last November to participating in the scheme, part of the so-called robo-signing scandal, and is awaiting sentencing.

DocX's clients were residential mortgage servicers that hired the company to, among other things, assist in creating and executing mortgage-rated documents to be filed with recorders' offices.  The servicers authorized specific DocX personnel to sign the documents on their behalf.  According to Brown's plea documents, she directed employees to forge and falsify signatures on these documents and, unbeknownst to the servicers, allowed employees who were not so authorized to sign the documents and have them notarized as if actually executed by the properly designated personnel.

LPS said it is working toward resolving outstanding civil litigation and earlier this week settled the securities fraud litigation brought by St. Clair Shores General Employees' Retirement System, subject to entry of a final order by the federal district court. Additionally, in December 2012, LPS resolved litigation filed by American Home Mortgage Servicing, Inc.

"Today's settlements are another major step toward putting issues related to past business practices behind us," said LPS President and Chief Executive Officer Hugh Harris. "As LPS continues to grow and exercise its leadership in the mortgage industry, we remain committed to enhanced regulatory compliance and operational excellence, which are crucial in our changing industry."  He said the company looks forward to favorably resolving its remaining regulatory and legal issues in the near future.

As a result of these settlements, as well as progress on other outstanding legal issues, LPS increased its legal and regulatory reserve in the quarter ended Dec. 31, 2012, by $48 million (which includes $14 million for the securities fraud settlement that was not previously included in the reserve). As of Dec. 31, 2012, the balance in the company's legal reserve, after the payment of expenses, was $223 million.