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This is HUGE! Now Federal Trustees are going against the Mortgage Servicers! WOW - it is getting more and more intense by the day!
Portion:
Today, a new court filing on one of the two cases, the proceeding in Federal bankruptcy court in Mississippi, has dramatically expanded LPS’ potential liability and increased the odds of an unfavorable outcome for the company.
The standing Chapter 13 Trustee for the Northern District of Mississippi, Locke Barkley, has joined the case on behalf of herself and of all Chapter 13 Trustees in the US.
By way of background, the Chapter 13 Trustee is called a “standing trustee.” Her role is to administer all of the bankruptcy estates for all of the Chapter 13 debtors in her district. She (and all other Chapter 13 Trustees) are interested parties because to the extent that illegal fees were included in proofs of claim and illegal fees were assessed to debtors to be paid through Chapter 13 plans, then all of that money should have gone to these estates to pay towards unsecured creditors. Needless to say, this is a large additional potential liability to LPS. The presence of the Federal bankruptcy trustee as a plaintiff should give the plaintiffs considerable credibility with the judge.
Another important milestone was passed on this case last week. One reader, a former Federal bankruptcy court litigator who was generally positve about the action based on his reading of both of the initial lawsuits claims did point out the obvious shortcoming, the absence of attorneys with class action experienced (and as important, infrastructure) involved in the cases. As he wrote:
I admire the strategy being used by the homeowners’ counsel. One case in federal court, the other in state court. One case destined for the old 5th Circuit, the other destined for a state court of last resort in a different circuit. Not exactly a circuit-conflict strategy, but carefully planned to improve chances of review by the Supreme Court of the United States if necessary.
It appears a motion for relief from stay was filed by the putative note-holder in both cases, which was granted but then set aside in the KY case (not clear what action was taken on that motion in the MS case). But the class definitions are slightly different (with a subclass averment in the KY case). A previous decision on point against an entity similar to LPS in one jurisdiction (MS) is icing on the cake.
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