, Salem, MA

February 6, 2013

Essex Register of Deeds will continue to go after $1.3M in restitution from 'robosigner'

By Douglas Moser
Staff writer

---- — The Essex register of deeds who is seeking $1.3 million in restitution from a reputed “robosigner” company plans to push forward with his claim after dozens of state attorneys general agreed to a settlement with the company over fraudulent mortgage foreclosure documents.

Calling the settlement “chump change,” John L. O’Brien, register of deeds for Southern Essex County, said the amount Massachusetts received would not address the problem companies like DocX, which produced certified real estate documents with fraudulent signatures and notarizations for mortgage lenders, created in registries.

“I think these companies got a pass,” O’Brien said. “They didn’t even get a slap on the wrist.”

He compared the problem to an oil spill that DocX, and its parent company Lender Processing Services of Jacksonville, should pay to completely clean up, including forensic investigations into the documents the companies filed over 15 years.

The $1.3 million restitution claim was filed last month in federal court in Jacksonville after DocX founder and chief executive Lorraine Brown pleaded guilty in November to federal fraud charges. The restitution would cover the cost of forensic audits of all DocX documents filed and the cost of ensuring they are replaced with valid documents, O’Brien’s office has said.

O’Brien said his office’s attorney is studying the settlement to see if it affects his claim.

Kevin Harvey, the first assistant registrar in the Southern Essex County district, which covers all of Essex County except for Lawrence, Andover, Methuen and North Andover, said the office identified 10,567 documents filed by DocX between 1998 to 2011 that the registry considers suspect.

Additionally, a 2011 forensic audit of all documents filed in 2010 “indicates that such corruption must necessarily extend well beyond the 10,567 admittedly or presumably false or fraudulent DocX/LPS documents that are at present recorded in the Southern Essex District,” O’Brien wrote in the federal court filing. A broader forensic audit would examine tens of thousands more documents to ensure their validity.

“For them to come in and refile new docs, that would bring in about $750,000 in revenue, but we can’t rely on the authenticity of those documents.That’s why I seek restitution to go out and get a forensic audit,” O’Brien said.

A fraudulent document in a chain of title puts a cloud over every subsequent valid property document, and could complicate homeowners trying to sell their property, refinance their mortgage or extract equity. Many of the fraudulent documents are mortgage assignments, which declares the sale of a mortgage from one company to another and can obscure what institution actually owns a given mortgage.

Lender Processing Services last week agreed to pay $120 million to settle allegations it “robosigned” documents and engaged in other improper conduct related to mortgage loan default servicing.

Massachusetts attorney general Martha Coakley and New Hampshire attorney general Michael A. Delaney joined 44 others in a consent judgment requiring Lender Processing Services and subsidiaries LPS Default Solutions and DocX to reform their business practices and, if necessary, correct documents they executed to assist homeowners.

LPS will pay nearly $1.6 million in fees and costs to Massachusetts and $457,961 to New Hampshire, which will be allocated toward enforcement costs and addressing the harm caused by the misconduct.

The consent 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.

Banks in 2010 slowed the pace of foreclosures, which peaked during the recession, after news reports of banks and subcontractors forging signatures and improperly notarizing foreclosure documents, including those detailing which institution actually owned a given mortgage.