A judge in New Orleans recently found one of the nation’s largest mortgage loan servicers guilty of pervasive fraud. In a scathing 26-page decision, bankruptcy Judge Elizabeth W. Wagner found that Lender Processing Services (LPS) repeated lies in her courtroom nearly ended in a family getting wrongfully evicted from their home.
Judge Wagner noticed strange things occurring in the foreclosure case against homeowners Ron and Larhonda Wilson. Option One Mortgage Corporation was trying to foreclose on the family, even though the Wilsons had proof that they had faithfully paid their mortgage. (The Wilsons, who already had nearly lost their home to bankruptcy, made sure to send each month’s check by certified mail.)
As Judge Wagner investigated the case, she found numerous problems with the testimony from a woman named Dory Goebel. While Goebel claimed to be an “assistant secretary” with an important position inside Option One, Wagner found that in reality Goebel is a poorly-trained clerical worker employed by LPS.
[Related article: Florida AG Details Forgery & Deceit in Mortgage Process]
Goebel testified that she was in charge of checking the Wilsons’ loan documents to verify they actually were behind on their payments.
But that didn’t happen, Wagner found. Instead, Goebel was instructed by her bosses at LPS to simply verify that the amounts owed on the court affidavits matched what LPS had in its computers.
The result: Nobody actually checked whether the Wilsons were behind on their mortgage, in violation of the law. And in this case, the Wilsons could prove their payments were up-to-date.
“In short, the affidavit was nothing other than a farce,” Wagner wrote.
Inflating Goebel’s job title, and claiming she worked at a different company, was a fraud intended to mask LPS’s mistake, the judge wrote.
“The abuse begins with a title. In this case, Ms. Goebel was cloaked with the position of “Assistant Secretary,” in a purposeful attempt to convey an experience level and importance beyond her actual abilities,” Wagner said in her decision. “Ms. Goebel is an earnest young woman, but with no training or experience in banking or lending.”
The scary thing, judge Wagner says, is that this case is not unique. Using a glorified clerical worker to attest to a foreclosure she knows nothing about is standard procedure at LPS, the judge found.
Nor is the practice of lying to courts anything new for LPS and other mortgage servicers, Wagner found.
“The fraud perpetrated on the Court, Debtors, and trustee would be shocking if this Court had less experience concerning the conduct of mortgage servicers. One too many times, this Court has been witness to the shoddy practices and sloppy accountings of the mortgage service industry,” Wagner wrote. “With each revelation, one hopes that the bottom of the barrel has been reached and that the industry will self correct. Sadly, this does not appear to be reality.”
LPS may face fines or other sanctions in the Wilson case. Meanwhile, Wagner’s decision was the third piece of bad news for LPS in just two weeks.
First, the company appeared in a lengthy report on 60 Minutes about how the company created a fake employee named Linda Green, and used her name and forged signature to claim she worked at dozens of different banks simultaneously and signed thousands of foreclosure statements a day. (We covered this sordid story here.)
Next came a consent decree from three federal regulators ordering LPS and other large servicers to improve their paperwork procedures to avoid accidentally foreclosing on the wrong people. The company could still face major fines, as we reported here.
[Related article: Feds Crack Down on Illegal Mortgage Practices]
Image: Carmella Fernando, via Flickr.com