Outsourcing Foreclosure Work Causes More Problems than it Solves

Daily Finance recently took another look at Lender Processing Services (LPS) and the myriad problems handing off foreclosure work to non-attorney processing services creates.

The case turning the spotlight on LPS this time is the Louisiana bankruptcy case of Ron and LaRhonda Wilson. The Wilsons, it seems, were current on their mortgage both times Option One asked the bankruptcy court for leave to foreclose. LPS now faces sanctions for perjury in connection with that case.

The testimony elicited in the case reveals some disturbing but unsurprising information to those familiar with the workings of the foreclosure industry:

LPS admitted that: “even if Goebel had reviewed the [correspondence] and been made aware of the existence of the checks in question . . . before she signed the affidavit . . . the affidavit would have remained unchanged.” The LPS process is to rely on the records on particular computer screens in Option One’s system, period, truth be damned.

This kind of behavior slips by far too often, particularly when the debtor is unrepresented and unequipped to understand and challenge the mechanisms at work.  In this case, however, the judge and the trustee are taking a hard look at LPS’s actions, and Judge Weiss is quoted as saying:

It seems reasonable that a mortgage lender should be able to avail itself of economic and expeditious means of collecting defaulted loans through the use of technology and delegation of tasks to lower cost labor. In many cases, the motions are granted by default, [because the debtors just can’t pay.] However, where, as here, the debtor contests the [request for permission to foreclose], the flaws in this automated process become apparent. At this juncture, an attorney must cease processing files and act like a lawyer. That means she must become personally engaged, conferring with the client directly and abandoning her reliance on computer screens as expressions of her client’s will. This did not happen in this case until the Court became involved.”
Of course, the unfortunate truth is that this case is far from isolated, and that the shift from document processor to discerning attorney rarely occurs in the foreclosure process, in large part because of the way that law firms are incentivized in these cases.  This video from Orion provides an eye-opening glimpse into exactly what those outsourcing firms are selling to the banks and where current priorities lie. 
Max weighs in at the end with his assessment of what the Wilson case says about the industry and its processes.  This single line from his analysis may say it all:  “LPS has created a thousand times more problems than they have solved.”