Why Your Mortgage Bank May Be Wrong About What You Owe Attention homeowners with mortgages, whether you're current or in default: Double-check your mortgage bank's math. There's a significant chance that the bank is wrong about how much you owe them, particularly if you're behind on your payments.

The revelation that mortgage servicers have been incorrectly applying payments and otherwise messing up their records isn't new. Professor Kurt Eggert of Chapman University documented the problem as early as 2004, and in his recent testimony before Congress, he underscored that nothing had changed. What is new, however, is testimony in New Jersey that gives real insight into how the mistakes are happening.

Late last week, Adrian G. Lofton gave the New Jersey court that is investigating mortgage fraud in New Jersey a sworn statement that details how mortgage servicer records are altered by employees of Lender Processing Services. Although the LPS employees are given logins and passwords to access the banks' own records for the purpose of correcting and reconciling the files, Lofton, a former LPS employee, explained how they instead destroyed the integrity of the banks' business records.

How It Works -- and Why It Fails

When an LPS client has a mortgage that goes into default, Lofton explains, LPS starts managing the loan. In order to do that, the appropriate LPS employees are given login information for the bank's database. As a security measure, each login is unique. That login grants access to the bank's entire database of current and defaulted loans, so that the employee can address whatever problem exists. For example, if a payment that should have been applied to a defaulted mortgage was accidentally credited to a current mortgage, the LPS employee needs access to the current mortgage to fix the error.

When an employee can't fix or reconcile data in an account, she is supposed to enlist the help of her supervisor, and if needed, her supervisor's supervisor. Each manager also has unique login information, and each bank apparently has additional security protocols that LPS employees are supposed to follow. If the employees and supervisors were following the rules, all would be relatively well. But according to Lofton, they were not:
"...109. ...most of the [LPS] Associate Team members had gained unauthorized access to the logins and passwords of their team associates and supervisors for all of the bank servicers' computers.

110. With this unauthorized access to the Bank's computers, the [LPS] associates could go into the banks computer files and manipulate the data....

112. I was particularly concerned that during "crunch" times ...Team Associates were cutting corners....

116. When an employee cut corners, the employee left out one or more steps that should have been performed and had to make something up.

117. The problem caused by cutting corners might not come to light until six months down the road when an attorney asks questions about the billing record."
Although Lofton doesn't say it, it's clear that some of those problems caused by cutting corners might never come to light.

Lofton traces the cause of the blatant rule-breaking to LPS's already well-documented obsession with speed over accuracy, something that has undermined the integrity of the lawyering of foreclosures. LPS rewards employees with bonuses based on how fast they resolve issues and how rarely they need to involve supervisors to get things done. That pressure to hurry up drives the employees to "make something up" as Lofton puts it, to get their jobs done.

Lender Processing Services was contacted on Thursday for comment, but as of publication had not replied.

Who Is Adrian Lofton?

Lofton worked for LPS from 2006 through 2007, and prior to that had worked for its competitors, starting in 2001.
Given his experience at other financial institutions, he was deeply disturbed by what he saw at LPS and raised his concerns up through the chain of command. Lofton says he was fired for his attempts at whistle-blowing.

Lofton sued for wrongful discharge, but didn't hire a lawyer, instead attempting to represent himself. Perhaps unsurprisingly, he lost his case. (To get a feel for what it's like for a pro se plaintiff to try to depose a witness represented by counsel, see this transcript of Lofton's.)

As to Lofton's agenda, well, his current filing doesn't further one other than trying to uncover the truth: Lofton made his filing in the New Jersey investigation of mortgage fraud in its courts. To the extent he can "win" anything, all he'll get is vindication.

The Cheapest Way to Mess Up Bank Records

LPS is the 800-pound gorilla of mortgage default servicing, doing over $1 billion of revenue in that business last year, according to its most recently filed annual report. And its clients include most of the big guns of the home loan business. In his time at LPS, Lofton reports seeing inappropriate account manipulations happening with the records of:
  • Bank of America (BAC)
  • Countrywide (now BofA)
  • Washington Mutual (now JPMorgan Chase) (JPM)
  • Option One Mortgage
  • Wachovia (now Barclays) (BCS)
  • Key Bank (KEY)
  • HomEq (bought by Wachovia, then Barclays),
  • EMC (now JPMorgan Chase)
  • Wells Fargo (WFC)
  • America's Servicing Company (Wells Fargo)
  • Saxon Mortgage
  • HSBC (HBC)
Even if some of those banks have dropped LPS since then, were their records ever comprehensively fixed?
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And what about other LPS clients? Surely they've picked up more, as the tidal wave of foreclosures really grew after Lofton left LPS. Indeed, that foreclosure surge surely worsened the problems, since the time pressure on LPS employees can only have gotten worse.

If you're tempted to feel sorry for LPS's bank clients, given that they might not even have realized that their contractor was messing up their business records, don't. Banks hire LPS -- and fail to effectively oversee it -- for one simple reason: They're trying to get something for nothing. LPS has risen to market dominance primarily because it doesn't charge the banks for its work. Instead, it charges the lawyers in its network who foreclose on the the banks' mortgages.

If the banks were willing to pay to have their business records handled with accuracy and integrity, they could have avoided these problems.

For consumers, the take-away message is simple: Your checking account isn't the only bank statement you need to balance to make sure the bank is tracking your money correctly. Start balancing your mortgage statements, too.

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Great, Really it is a best mortgage blog. Thanks for share this.

November 28 2013 at 2:24 AM Report abuse rate up rate down Reply

Awesome article! http://www.bestloansLA.com has some good info on loans.

June 12 2011 at 12:06 AM Report abuse rate up rate down Reply

People with countrywide loans listen ......... Do your research ... See if it was recorded and even if it was ... Ask Bank of America ... Who owns the Note. Federal law states ... you are only to pay the Note Holder. I must be the Original Note. Not a copy or duplicate or something off the computor. Now the Banksters could tell you they have the servicing rights but they still have to know who is holding your note. If they can't tell you ... Don't PAY THEM !!! I have not paid my loan in over 2 and half years and I won't. They can't tell me who is holding my note. Why would anyone pay anyone who is not in standing of the original paperwork. The Note is a Check ... You signed the Check and gave it to a lender .... If that check can not be found ... Oh Well ..... Sorry dear Bank ... go screw yourself.

March 30 2011 at 7:14 PM Report abuse rate up rate down Reply

not for profit foreclosure defense and loan modification referral service
shawn.mahoney@clearpointnow.org www.clearpointnow.org

March 30 2011 at 6:21 PM Report abuse rate up rate down Reply

Can a bank be sued for completed a Hostile Mortage Rate Loan?????

March 30 2011 at 5:00 PM Report abuse rate up rate down Reply

my sisterinlaw works at bac with home loans. she said when bac took over countrywide, all of the loan modifications got shredded. i guess ours got shredded too, we had to file bankruptcy to keep our house. and when you call for a loan officer,get each names first and last, they do not like to talk to customers so that's why they send your call around.and write down the state to whom you are talking too.

March 30 2011 at 4:02 PM Report abuse rate up rate down Reply

HELP!!!!!If you can I had a home loan with COUNTRYWIDE and what a ride it's been so now BAC has my loan and I can not get anywere with BAC I am behind with my payments and we are so upset the last thing my husband and i want is to lose our home.IF ANYONE OUT THERE CAN US PLEASE?????? My email is sandrasinopoli@aol.com COUNTRYWIDE HAS TAKEN US FOR OVER 14,000 THAT IS WHAT MY DOCUMENT READ FROM COUNTRYWIDE WE HAVE TALKED TO SO MANY PEOPLE @ BAC AND THEY JUST PASS THE PHONE AROUND AND AROUND I PRAY TO THE LORD ABOVE THAT SOMEONE WILL HELP!!!!!!!!!!

March 30 2011 at 2:36 PM Report abuse +1 rate up rate down Reply
2 replies to sandy's comment




March 30 2011 at 3:35 PM Report abuse +1 rate up rate down Reply

Hi Sandy! We too have been struggling we Bank of America , after our loan was transferred from Countrywide. Mers transaction. I downloaded court documents from land ex remote site stating Chase is the trustee, but No note. We met with a Bankruptcy attorney and if we do Chpt 13 we have to pay the arrears over a 3 year span on top of our already high mortgage payment. That just makes no sence. We haven't made a paymenty since July. We received an ACT 91 notice in Dec 2010. When I spoke with Bank of America they said my loan was not in foreclosure status. I contacted the states attny general and recived a call from BAK CEO office. They stated they would help us modify our loan and we were assigned a negotiator who doesnt return our phone calls. Its all bull. We need to stand up and fight.
Contact Hagens Berman Lawfirm. They are based in Seattle but are suing BAK. for permananet MODIFICATIONs.

April 20 2011 at 12:06 PM Report abuse rate up rate down Reply

if it puts money in the banks pocket, they will not say a word until pointed out to them by someone that can cost them money!!!

March 30 2011 at 1:05 PM Report abuse rate up rate down Reply

Trust me this is correct.. I worked in a company that dealt with foreclosures and home loans and this whole system is truly messed up...

March 30 2011 at 9:55 AM Report abuse +5 rate up rate down Reply

Bank of America take the prize for mismanaging mortgage accounts. They do not like to fix their errors. I've been trying since 2007 to get some major problems corrected, and even with help from the Comptroller of the Currency they just keep the revolving door turning. They blatantly lie about the issue even when presented with evidence to prove the error. No more BoA bailouts!

March 30 2011 at 9:05 AM Report abuse +8 rate up rate down Reply