UPDATE 1-LPS settles U.S. foreclosure fraud criminal probe

Fri Feb 15, 2013 6:29pm EST

By Jonathan Stempel

Feb 15 (Reuters) - The mortgage servicing company Lender Processing Services Inc has agreed to pay $35 million to resolve a federal criminal investigation into foreclosure fraud, the U.S. Department of Justice said on Friday.

The settlement resolves allegations over the Jacksonville, Florida-based company's involvement in what the government called a six-year scheme to prepare and file more than 1 million fraudulently signed and notarized mortgage documents in property recorders' offices nationwide.

It followed a guilty plea last November by Lorraine Brown, the former chief executive of LPS' DocX LLC unit, to a felony charge of conspiracy to commit mail and wire fraud over the scheme, which ran from 2003 to 2009.

LPS entered into a two-year non-prosecution agreement that requires it to meet many conditions, including cooperating in federal probes, and alert the government to any abuses in mortgage or foreclosure documentation services at the company.

The $35 million payment includes criminal penalties and forfeiture and must be made within 10 days to the U.S. Marshals Service and the U.S. Treasury, the Justice Department said.

An LPS spokeswoman did not immediately respond to requests for comment.

Foreclosure abuses became notorious in 2010 as borrowers, politicians and regulators accused banks and mortgage companies of pursuing foreclosures that were based on defective or fraudulent documentation.

Many documents were found to have been signed systematically without being read, through a process known as "robo-signing."

In February 2012, five large U.S. lenders agreed to a $25 billion settlement with regulators across the country to end probes into foreclosure abuses.

Shares of LPS closed Friday down 17 cents at $25.09 on the New York Stock Exchange. The settlement was announced after U.S. markets closed.

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