If you have "no place to go," come here!

Sweet Jeebus, mortage servicers had PASSWORD CONTROLLED ACCESS TO BORROWER PAYMENT RECORDS, and altered them?

OMG! Just when I think, "Finally, I've been cynical enough!" something even more appalling scuttles out from under a new rock! Here's a great summary of the state of play on foreclosure fraud at Yves's place; this is I thought was the nut graf:

LPS’s [Lender Processing Services] reach is wide. 14 of the 15 biggest loan servicers are its clients and every one of the 50 biggest banks use some of its services [for mortgage and foreclosure procssing]. ...

The City of St. Clair Shores Employees’ Retirement System is the lead plaintiff in a class action lawsuit against Lender LPS that was amended and expanded yesterday. The suit is against the company and its three top officers, char[g]ing them with violations of Federal securities laws with the intent of inflating the company’s revenues and stock price.

The filing relies heavily on affidavits by 17 confidential witnesses, all former LPS employees, some of them supervisory level. It is thus able to allege that bad practices were widespread and clearly designed and driven by top management.

Yes, control fraud, organized and carried out by thieves and looters at the executive level (sorry for the redundancy). In other words, yes, we need to see bankster CEOs in orange jumpsuits doing the perp walk.


But the new and more troubling material is the mess LPS has made of bank records. LPS employees were given password controlled access to borrower payment records and could and did alter those accounts. These passwords were routinely and widely shared, in contravention of good practice. And since everything at LPS was organized around maximizing throughput rather than doing anything correctly, the errors were widespread:

LPS employees were rewarded for their speed, and this resulted in the violation of security protocols and significant and pervasive errors in the default services that they were providing (e.g., the application of mortgage payments to incorrect accounts). ....

Now consider the question of the integrity of borrower records. Because LPS was so casual about password control, a large number of employees could and did:

.access mortgage records of borrowers and alter them by changing entries, reversing transactions, adding transactions, and moving funds in and out of suspense accounts.

And the company was not terribly concerned about accuracy:

There was a huge volume of ledgers that had to be created and problems in loan files that had to be researched and unraveled by CW [Confidential Witness] 16 and his colleagues. These problems included, among others, missing payments, misapplied payments from other loan files, and payments that should have been attributed to other loans…

... According to CW16 “a lot of people didn’t understand the financial side and just winged it.”

Ya know, I can screw up my account all on own without any help from the banksters. But if I were rewarded for my speed, I bet I could screw it up even faster!

NOTE Economic Populist has a fine summary of the state of play on bankster fraud. And Time is setting up some "bad apples" to take the fall. Baby steps!

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lizpolaris's picture
Submitted by lizpolaris on

Oh, right. The larger the company, the less it applies.

Folks in IT at my company doing that would be fired, due to the liability the company would have for SOX violations. But as we know, not everybody has to play by the rules.

lizpolaris's picture
Submitted by lizpolaris on

more stringent audit controls after the Arthur Anderson scandal, if I remember the timing correctly. At any rate, access violations such as you mention above would never pass a SOX audit and would result in penalties and/or fines for the company - if it were prosecuted. Because these violations were directly used to distort the financial reporting of the company, SOX law would apply.

Sounds like LPS also has major data privacy violations, given the number of people alleged to have access. Although data privacy is a much bigger deal in Europe than it is in the US.

letsgetitdone's picture
Submitted by letsgetitdone on

SOX made the Executives in companies personally responsible for audit errors, including frauds. Isn't that right?

If so, we've got some perp walk possibilities here.

RedQueen's picture
Submitted by RedQueen on

but someone over in Gawker's (of all places) comments is talking MMT and how a country fiat in it's own currency yadda yadda yadda.

The idea is spreading. W00T!

Submitted by lambert on

Teh google shows nothing....

RedQueen's picture
Submitted by RedQueen on

Here ya go

Like I said- it's just in comments. But it was a little disconcerting to be reading gawker and see that.

Submitted by Anchard on

I'm not sure it would - technically, the financial records they screwed up were those of the servicers, not their own. And having read through the horror that is the MERS Membership Agreement, I'd be willing to bet LPS followed a similar practice where they have the client sign over all the necessary legal powers while exempting LPS from any liability for the accuracy of information.

But I would be thrilled to get a crack at an LPS contract just to see how the indemnifications actually work.

Anyway, yet another great catch by Yves, and thanks to Lambert for putting this up.

lizpolaris's picture
Submitted by lizpolaris on

So I believe it would. But even if you are using the alterations to skew the financial reporting of a client, that would also run afoul of the audit regulations which should be in place on behalf of your client.

Submitted by Anchard on

and I was sloppy not to catch it. I downloaded the doc and will read through it this weekend. I would like nothing more than to see these people nailed, and I would just hate for them to escape on some stupid technicality.

Submitted by lambert on

It would be excellent if we could really move the discussion forward analytically -- I can heighten what Yves writes, and make it more accessible, which is a contribution, but not a first order one...

danps's picture
Submitted by danps on

We already know there's been enough smoke to justify all kinds of investigations. What will it take to get the Justice Department to actually lurch into action?

When the headlines start describing a breakdown in the culture of impunity I'll be a lot more excited.