Mortgage Servicing Horror Stories - Fair Game - NYTimes.com THE authorities have fallen silent lately about a possible settlement over foreclosure abuses at big mortgage servicing companies. The talks began in earnest last March, and people keep whispering that a deal is nigh. But last week, a spokesman for Shaun Donovan, the secretary of Housing and Urban Development and a lead negotiator, said that there was nothing new to report. That's probably not a terrible thing. After all, no deal is better than a bad deal. State and federal authorities jumped into these talks without conducting serious investigations into foreclosure shenanigans. Why strike a deal - one that would, say, shield banks from new litigation over toxic loans, flawed securitizations and the mess at MERS, the registry that has made such a jumble of land records - without knowing what happened? So it's nice to know some attorneys general are taking matters into their own hands. One is Martha Coakley of Massachusetts, whose lawsuits against big banks have unearthed important details about dubious mortgage practices. Another is Catherine Cortez Masto of Nevada. She filed a case against Morgan Stanley that was settled last year, generating as much as $40 million in monetary relief for borrowers. She also participated in a suit against Wells Fargo that resulted in $45 million in principal forgiveness for Nevadans. And she has a case pending against Bank of America. Last month, Ms. Masto sued Lender Processing Services, the huge default and foreclosure processor that works behind the scenes for most large banks. With this case, she demonstrated how enlightening an in-depth study can be. The complaint, which came after a 14-month inquiry, contends that L.P.S. deceived consumers by committing widespread document execution fraud, misrepresenting its fees and making deceptive statements about its efforts to correct paperwork. Investigators interviewed former L.P.S. employees and customers and examined foreclosures the company had worked on. "L.P.S. played a critical role in the deceptive foreclosure practices that have harmed Nevada homeowners and burdened Nevada courts," the complaint said. Consumers have paid the price, it continued, "through bankruptcies, evictions and foreclosures that were predicated upon false, forged, fraudulent and/or inaccurate documents." L.P.S. strongly disputes the allegations and has vowed to fight. The company has come under the microscope partly because of its size and scope: its loan-processing services touch 27 million loans, half of all the mortgages in the nation, by dollar amount. Most large loan servicers use L.P.S. systems. It's a lucrative business. For the nine months ended Sept. 30, the company's loan transaction services generated operating margins of 20 percent on $1 billion in revenue. When mortgages go into default, L.P.S. provides banks servicing the loans with an automated system that monitors the cases as they proceed. The details recounted in the Nevada lawsuit describe how that system hustled borrowers through the foreclosure process. A boiler-room operation comes to mind, or that great Lucille Ball skit in which she tries in vain to keep up with the assembly line at a chocolate factory. For example, a former L.P.S. employee who worked in "attorney management," overseeing firms that performed legal work for foreclosures, told Nevada investigators that L.P.S. required him to resolve issues raised by the firms at a rate of 30 foreclosure files every hour. That's two minutes apiece. The employee soon left L.P.S. Former workers at another division described their work as "surrogate signers." They said their job was to forge signatures on documents. These people were hired through temporary agencies; one said she was paid $11 an hour and told that her job was "to sign somebody else's signature on documents," the lawsuit said. She told investigators that she signed roughly 2,000 documents a day for months. Another former worker said that when a banking executive came by for a tour, the signers were told "to lie" and tell the executive they were signing their own names, the lawsuit says. Notarization worked much the same way, the complaint said. One former worker said she realized that she might have notarized documents she had also signed as a surrogate. As a result, the lawsuit said, borrowers had to deal with documents containing "false assertions about which entity was authorized to foreclose, and false assertions about whether the consumer was delinquent on a loan payment." Kind of important details, no? Michelle Kersch, a spokeswoman for L.P.S., said it no longer executes documents in Nevada and does so elsewhere "with stringent controls in place" to ensure compliance with all rules. In an interview last Thursday, Ms. Masto declined to talk specifically about the case against L.P.S. But she said that her office had been working on mortgage-related investigations since 2007, when consumers began complaining. "It really required our team to figure out what was going on," she said, "to understand it from the beginning to the end, then put in place a plan based on our limited resources to target the types of fraud we were seeing." Eighteen people - investigators, prosecutors and support staff - work full time on mortgage issues in the Nevada office. "The challenge we have is statute of limitations on these cases," Ms. Masto said. It could be anywhere from four to six years, depending on the incident. When she filed suit against L.P.S., she said it was "the next, logical step in holding the key players in the foreclosure fraud crisis accountable." That suggests other cases are forthcoming. "If you are going to allow banks to skate around the integrity of the system," she said, "what kind of justice is that?"