The big news in the mortgage and foreclosure world was that servicer American Home Mortgage Servicing, Inc. filed a lawsuit against Lender Processing Services, Inc. (LPS) and its subsidiary, DocX, in Dallas County District Court in Texas for breach of contract (among other claims). Or at least that is what was alleged in the petition. Translated into plain English, AHMSI sued LPS and DocX for LPS and DocX for widespread robosigning, which potentially calls into question the validity of documents on more than 30,000 mortgages–according to the lawsuit.
I highly recommend reading the lawsuit and its many exhibits, as it is a roadmap of how at least a piece of the mortgage servicing industry works. And, it’s a look at what happens if your loan is serviced by American Home Mortgage Servicing, Inc./AHMSI and you are facing foreclosure.
But enough about the particulars of the lawsuit itself. What does this mean for homeowners?
I believe this lawsuit calls into question virtually every foreclosure attempted by AHMSI. This alleged fraud was not simply a few isolated incidents–over 30,000 cases have been claimed. More importantly, this is not just some suspicion or claim by an attorney or a story on 60 Minutes–this is an actual admission in a court document by one of the parties to the transactions. This is huge for homeowners.
The practical effect for homeowners, in my opinion, will be that it will be a little less difficult to stop AHMSI foreclosures in court. This lawsuit (and its accompanying exhibits) will be attached to applications for temporary restraining orders as “Exhibit A.” I certainly plan to use it, and I believe judges will take a second look at foreclosures that AHMSI and LPS and DocX have touched.
Does this mean that every document that AHMSI, Lender Processing Services, and DocX created is fraudulent? No. But the practice was widespread enough that it calls into question virtually every foreclosure they are now attempting.
In the grand scheme of things, the AHMSI lawsuit against LPS and DocX didn’t say anything that wasn’t already being alleged across the country; namely, that there are serious inconsistencies in foreclosure-related documents. But to have this admission come from one of the parties themselves is a major change and another reason for homeowners to take control of their own fate instead of leaving it up to the whims of the bank.