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ROBO-SIGNING IS NOW CALLED SURROGATE SIGNING
AHMSI SUIT CONFIRMS PRACTICE IS WRONG, UNAUTHORIZED AND INVALID
EDITOR’S NOTE: I find it interesting that LPS continued to fabricate and forge documents after AHMSI told them to stop. It could only mean that they were really taking orders from someone else. The ankle biting is escalating.
The AHMSI lawsuit seeks:
- a declaratory judgment that the contract between the parties, as amended, is binding and effective;
- an order compelling defendants to arbitrate AHMSI’s claims for breach of contract and indemnification; and
- an award of damages relating to non-arbitrable claims sufficient to reimburse AHMSI for the millions of dollars in losses stemming from defendants executing, notarizing, and recording improper assignments on behalf of AHMSI.
DocX prepared, executed and recorded lien releases, assignments of mortgage and related documents for AHMSI from April 2008 through November 2009. During this time certain DocX and LPS employees were duly appointed by AHMSI’s board of directors as “Special Officers” of AHMSI, with powers limited to executing mortgage-related documents. However, in late November 2009, LPS informed AHMSI that from March 2009 through October 2009, a substantial number of assignments of mortgage were executed by “surrogate signers,” that is, by individuals who were not designated as Special Officers, but who signed in the name of one or more of the designated Special Officers. At no time did AHMSI sanction or know of the “surrogate signing” practices of LPS and DocX.
Jordan Dorchuck, chief legal officer – AHMSI, said, “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. Our remediation efforts are, and have been, focused on correcting affected assignments of mortgage to ensure they comply with all local, state and federal laws. This has been a vast undertaking, necessitating coordination with local counsel in each state.”
Based in Coppell, Texas, AHMSI is the 15th largest mortgage servicer in the country, managing nearly $72.5 billion in loan servicing, representing approximately 384,000 customers. Since its inception in April 2008, AHMSI has modified over 175,000 mortgage loans, including over 27,000 under the U.S. government’s Home Affordable Modification Program (HAMP). AHMSI’s more than 3,000 associates work each day with the mission of helping families preserve their dream of home ownership. AHMSI is a privately-held company owned by equity funds managed by WL Ross & Co., a financial management company with over $8 billion in assets under management.
SOURCE American Home Mortgage Servicing, Inc.
Philippa Brown, +1-469-645-3103, philippa.brown@ahmsi3.com
[[Update 1: Changes terminology from robo-signing to surrogate signing.]]
Lender Processing Services Inc. (LPS: 17.045 -2.43%) and its DocX affiliate caused American Home Mortgage Servicing Inc. to lose millions from the robo-signing of mortgage documents, a lawsuit filed Tuesday contends.
Coppell, Texas-based AHMSI filed suit in a Dallas district court against Jacksonville, Fla.-based LPS alleging more than 30,000 residential mortgages across the country were affected by “improper execution, notarization and recording of assignments of mortgage.”
LPS could not immediately be reached for comment.
The lawsuit comes on the heels of AHMSI’s unsuccessful attempt to recover its losses during more than a year of talks with LPS. AHMSI said the defendants first promised to indemnify AHMSI and then later claimed it had no duty to do so because the contract involved with the faulty assignments had already expired.
But AHMSI contends the “defendants conveniently ignore that they created tens of thousands of assignments of mortgage and accepted hundreds of thousands of dollars in payment in accordance with the terms of a supposedly nonexistent contract.”
The lawsuit seeks a declaratory judgment that the contract between the parties is binding and an order compelling LPS and DocX to arbitrate AHMSI’s claims of breach of contract and indemnification. It seeks an unspecified amount of damages, but puts the figure in the millions.
“DocX prepared, executed and recorded lien releases, assignments of mortgage and related documents for AHMSI from April 2008 through November 2009,” AMSI said.
Certain DocX and LPS employees were appointed by AHMSI’s board of directors as “special officers” of AHMSI with powers limited to executing mortgage-related documents, according to the mortgage servicer.
“However, in late November 2009, LPS informed AHMSI that from March 2009 through October 2009, a substantial number of assignments of mortgage were executed by ‘surrogate signers,’ that is, by individuals who were not designated as special officers, but who signed in the name of one or more of the designated special officers. At no time did AHMSI sanction or know of the ‘surrogate signing’ practices of LPS and DocX,” AHMSI said.
The servicer said it terminated its contract with DocX after the revelation and conducted a 50-state remediation effort to correct affected assignments.
“Defendants practice of ‘surrogate signing’ has forced AHMSI to address a myriad of legal issues, problems and proceedings in venues across the country,” the lawsuit alleges.
AHMSI is one of the largest mortgage servicers in the country. It manages nearly $72.5 billion in loan servicing, representing about 384,000 customers, the company said.
In October, LPS said varying signature styles from its subsidiary, DocX, resulted from a DocX practice that has been discontinued and only affected two lenders/servicers, but did not identify those servicers. LPS said at the time that it had not executed affidavits with substantive information on behalf of its clients since 2008, and said it has been mischaracterized in the media in terms of its default-related services.
Since then, LPS and DocX have the the source of several investigations. In April, Michigan Attorney General Bill Schuette said he would look into questionable mortgage documentation filed in the state’s Register of Deeds offices, particularly those linked to DocX.
Also in April, LPS signed a consent order with the Federal Reserve to settle a federal investigation into foreclosure practices at the firm and major mortgage servicers. LPS was required to boost oversight of its processes.
Write to Kerry Curry.
Follow her on Twitter @communicatorKLC.
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