One gray patch hovers over the celebration: The back-office technology provider’s runaway success means it is tangled up in the foreclosure crisis. “I was thinking about the dark clouds over the company,” Joe Nackashi, the chief information officer, tells the crowd. “Sure, we have made mistakes. But I don’t want to let that cloud this day.”
No, don’t do that, buddy! I mean after all, what are a few investigations when you’re pulling in money hand over fist?
LPS employees “seem to be creating and manufacturing ‘bogus assignments’ of mortgage in order that foreclosures may go through more quickly and efficiently,” the Florida Attorney General’s Office says in an online description of its civil investigation. “We’re concerned that people might be put out of their houses unfairly and unjustly,” Bill McCollum, the attorney general, told Bloomberg Businessweek. In a third investigation, the U.S. Trustee Program, the branch of the Justice Dept. that polices bankruptcies, is looking into whether LPS is “improperly directing legal action” to hasten foreclosures, according to a 2009 opinion issued by the bankruptcy court in Philadelphia. A Trustee spokeswoman declined to comment.
BusinessWeek describes the problems with Lender Processing Services better than I’ve seen elsewhere.
And this is just good context:
Wall Street’s unspoken strategy has been to kick mortgage losses down the road until an economic recovery reinflates the housing market. The faulty-foreclosure crisis has forced the issue back into the present tense, triggering a fight over who will bear the brunt of those losses. The combatants—all of whom are trying to minimize their share of the damage—include homeowners, lenders and mortgage brokers, loan servicers and the underwriters of mortgage-backed securities, the buyers of those securities, title insurers, rating firms, and the federally controlled mortgage buyers Fannie Mae (FNM) and Freddie Mac (FRD).
I always like it when journalists end their pieces on FUBAR situations with ideas to fix or at least ameliorate the situation. BusinessWeek does that here. And its kicker gets at one of the most critical points, noting that:
The longer it drags on, the more the foreclosure crisis corrodes Americans’ faith in their financial and legal systems. A pervasive sense of injustice is bad for the economy and democracy as well.
Amen to that.