The housing crisis has brought with it a barrage of lawsuits, many of which are taking direct aim at the practices of default servicing firms.
One such case filed in a U.S. bankruptcy court in Mississippi names ""Prommis Solutions Holding Corp."":http://www.prommis.com, a[IMAGE]provider of non-legal foreclosure and bankruptcy fulfillment services, and the default services arm of the mortgage outsourcing firm ""Lender Processing Services"":http://www.lpsvcs.com (LPS) as defendants.
The lawsuit seeks class-action status and alleges the firms are taking part in a fee-splitting arrangement for services provided to mortgage lenders through LPS' attorney network. By law, legal firms are not allowed to split fees with anyone who is not also an attorney or pay a non-attorney in exchange for a case referral.
The suit charges the defendants with disguising the alleged illegal kickbacks as administrative fees and other various types of fees which the plaintiffs argue are ultimately charged back to the borrower.
Jeff Carbiner, CEO of Jacksonville, Florida-based LPS, called a conference call with reporters last week to address[COLUMN_BREAK]
the issue. He noted that his company has not yet been served with the complaint but is aware that the Mississippi lawsuit, among others, has been filed against many defendants, including LPS, alleging ""unlawful fee-splitting and unauthorized practice of law.""
""The allegations contained in the complaints inaccurately describe the business of LPS, and LPS does not believe that the plaintiffs will be able to achieve class certification,"" Carbiner said.
Carbiner explained that these same allegations were already successfully defended in 2008 in a Texas.
""In that case,"" Carbiner said, ""it was clearly demonstrated that the allegations of fee-splitting were meritless and the action was dismissed voluntarily by the plaintiff. The judge presiding over the case in federal court then entered an order dismissing the matter with prejudice. LPS believes it will achieve a similar result in the recent filings by again, clearly demonstrating the legitimacy of its business model.""
According to Carbiner, the technology and services LPS provides, ""are not legal services"" and therefore not subject to the fee-splitting legalities outlined in the complaint.
Dick Volentine, corporate counsel for Atlanta-based Prommis, issued the following statement in response to the allegations: ""Although we have not yet been served with the complaint, we are working with outside counsel to review the pleadings and the underlying facts in the lawsuit. Nevertheless, we firmly believe the claims are without merit. Therefore, we will contest these allegations and vigorously defend ourselves against all claims.""
LPS also faces a lawsuit in Kentucky alleging the same fee-splitting infractions. There too, the company expects its success in the 2008 Texas case to serve as a precedent.