Hawaii Part of National ‘Robo-Signing’ Settlement

Hawaii has joined 44 other states in reaching a $120 million multi-state settlement with Lender Processing Services, Inc. and its subsidiaries, LPS Default Solutions and DocX, regarding improper signing of mortgage documents.

According to the Department of Commerce and Consumer Affairs’ Office of Consumer Protection, the proposed agreement resolves allegations that the Florida-based company, which primarily provides technological support to banks and mortgage loan servicers, “robo-signed” documents.

It also allegedly engaged in other improper conduct related to mortgage loan default servicing.

When entered by the court, the judgment would require LPS and its subsidiaries to reform its business practices and, if necessary, to correct documents it executed to assist the homeowner.

Hawaii’s share of the settlement is approximately $401,030. Hawaii’s lawsuit and proposed stipulated judgment were filed and submitted for approval yesterday in state Circuit Court in Honolulu.

“This settlement assures that the unconscionable mortgage loan default servicing practices alleged against LPS and its subsidiaries will not happen again,” said Bruce B. Kim, executive director, of the Office of Consumer Protection.

“Hawaii is going to go after organizations that try to take advantage of our residents.”

Among other things, the Hawaii judgment will require proper execution of documents and prohibit signature by unauthorized persons or those without first-hand knowledge of facts attested to in the documents, enhanced oversight of the default services provided, and a review of all third-party fees to ensure that the fees have been earned and are reasonable and accurate.

The settlement does not prevent victims from taking legal action against LPS.

Once the judgment is entered, LPS must conduct a review of documents executed during the period of Jan. 1, 2008, to Dec. 31, 2010, to determine what documents, if any, need to be re-executed or corrected.

If LPS is authorized to make the corrections, it will do so and will make periodic reports to the Office of Consumer Protection regarding the status of its review and/or modification of documents.

Consumers may also call the LPS toll-free number that is being set up and request review and correction of any documents executed by LPS at any time.

The LPS toll-free number will be placed on the OCP website when it is operational.

“Going forward, the provisions agreed to by LPS and its subsidiaries will result in severe penalties should LPS or its subsidiaries ever violate the terms of the settlement,” Kim said.

“This is yet another step in ongoing federal and state efforts to address questionable mortgage loan default servicing practices which may have occurred during the financial crisis.”

The following joined Hawaii in the settlement: Alabama, Alaska, Arizona, Arkansas, California, Connecticut, Florida, Georgia, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Mississippi, Montana, Nebraska, New Hampshire, New Jersey, New Mexico, New York, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee, Texas, Utah, Vermont, Virginia, Washington, West Virginia, Wisconsin, Wyoming, and the District of Columbia.