It looks like foreclosure mill law firms in Arizona better start to beware. Lawsuits against LPS have revealed what looks to be unlawful, undisclosed fee sharing (kickbacks) in bankruptcy court, and the unauthorized practice of law by LPS and foreclosure mill non-lawyer employees.
Interesting allegations regarding the LPS agreements arose in class action lawsuits in other jurisdictions, as reported by Yves Smith at Naked Capitalism here:
The smoking gun in both cases is that the plaintiffs have gotten hold of the agreements both between the network law firms and LPS, and LPS and the servicers. Some of the language in the agreements is damning on its face. For instance:
42. One of the standard definitions in the DSA [Default Services Agreement, a contract between LPSand the servicers] defines the term“Fidelity Network” (LPS Default is formerly known as Fidelity National Foreclosure & Bankruptcy Solutions).
43. That definition states that the servicer is required to select attorneys involved in the “Fidelity Network” at the servicer’s discretion, who are retained and managed by LPS Default to handle foreclosures “or otherwise provide services in accordance with the DSA”…..
46……“Fidelity has entered into an agreement (the “agreement”) with the servicer whereby Fidelity (LPS) has agreed to perform various legal services (emphasis supplied) for the servicer that include mortgage foreclosures, bankruptcies and other loan default services (the “services”).
This language is contrary to the way LPS has claimed the relationship between the servicers and the network firms work. It has asserted that the servicers pick the law firms and exercise control over them and LPS merely serves as an information hub. The language of the agreements and the other information presented in these filings present a starkly different picture, that of the servicers effectively delegating much of the work of overseeing the law firms to LPS and LPS in turn engaging in activities that look an awful like practicing law, with the law firms looking more like LPS’s arms and legs rather than independent parties.
This chipping away at the role of LPS is a hopeful sign. Many systematic abuses, such as the prevalent application of junk fee and fee pyramiding, appears to be hard coded in LPS’s software. The more lawyers and investigators keep pulling on this thread, the more abuses they are likely to expose.