Presented by Ricardo & Wasylik, PL

Previous post:

Next post:

Even More Fraud by Bank Lawyers Exposed in Class-action Lawsuits

Paper Monster

by Mike on October 5, 2010

It’s becoming more and more apparent that plaintiffs’ foreclosure mill lawyers will lie about almost everything in order to keep their assembly line running. Now, two class-action lawsuits—one in Kentucky, one in Mississippi—threaten to expose the lies that are baked right into the system that the banks use to pick their lawyers.

Yves Smith over at Naked Capitalism breaks it down.

Say Hello to Lender Processing Service

Lender Processing Service (LPS)… acts a sort of general contractor, farming out various tasks to both internal staff as well as outside firms. But LPS’s business pitch to the servicing industry was that it would come in and use a technology platform and provide (if desired) a turnkey solution, FOR NO ADDITIONAL COST than what the servicers were already paying on foreclosures.

So LPS doesn’t take anything from the servicers—the companies hired by the lenders to manage mortgage loans. How, then, does LPS make its money? Simple: it skims off the fees the attorneys get paid.

The terms of standard agreements provide for the payment of $150 at the time of referral… Network firms allegedly pay other fees as various milestones are reached, and these are couched as fees for technology, administrative review, document execution, and other legitimate-sounding services.

Secret Kickbacks and Lies to the Court

So what’s wrong with this? In Florida, law firms that do this are paying for referrals—strictly prohibited by the Florida Bar. Other states have similar rules. In spite of this prohibition, maybe even because of it, LPS requires its network lawyers to keep these fees and kickbacks a secret—even when the law requires the lawyers to disclose them to the court.

In a bankruptcy case, any attorney pleading before the court must disclose every disbursement pursuant to a case, no matter how minor. Yet the payment of fees to LPS have never been disclosed to a single bankruptcy judge in the US, since LPS requires they be kept confidential. LPS and its network lawyers are thus engaged in a massive, ongoing fraud on all bankruptcy courts in the US.

An Axe to the Neck of the Foreclosure Fraud Monster

If these lawsuits are successful, it would be an axe to the neck of the foreclosure fraud monster that tramples our communities. There are two ways these suits threaten the foreclosure industry.

First, the lawyers who are illegally splitting fees and then concealing them from the courts can—and probably should—lose their licenses to practice law. Virtually every law firm that handles foreclosures today would be gutted. Those remaining would have a stark lesson about what it means to lie to the courts.

Second, and perhaps a greater impact, is that the current money pipeline would dry up for LPS and its referral network. Plaintiffs’ lawyers would actually have to form relationships with and—gasp—even communicate directly with their clients, the banks, instead of dealing with them through layers of proxies. The current mass-production model would fail, removing the incentive for law firms to take the practice of law out of the practice of law.

Discovery is a Wonderful Thing

If you’ve been following the news at all you know that the foreclosure industry has been hit with one revelation after another. The banks and their lawyers have, in effect, been submitting written perjury in the form of falsified affidavits and the exposure of this practice has had a devastating impact on the perpetrators. But this would never have come to light but for the depositions of those robo-signers—part of the litigation phase lawyers know as discovery.

The discovery phase in these two class-action lawsuits promise to bring to light not only the illegal fee-splitting practices we already suspect, but has the potential to expose even deeper, darker secrets that we may not yet expect. As the class-action lawyers dig deeper into the practices of LPS and its network counsel, we may learn things that shock us.

And that’s when it will start getting very interesting.

A Thousand Words

( Photo Source / Photo Rights )

Want to know more? Contact us at Ricardo & Wasylik, PL.

Previous post:

Next post: