The end of the American Dream in an avalanche of foreclosures has been disaster for many, but its been boom times BABY! for anyone in the foreclosure business. And Jacksonville-based Lender Processing Services is in the thick of it.

LPS, a spinoff of Fidelity Information Services Inc., manages mortgage loans for banks, both when the loans are performing and when they go into default. Miss a payment and you begin a churn through a mill where the size of the loan increases dramatically as loan servicers add late fees, the cost of drive by appraisals and sometimes stuff like property insurance for people who already have it or flood insurance for people who don’t need it.

Loan Processing Services is raking in money, more than doubling its earnings just on foreclosures from 2007 to 2008, from $473-million to $1.5-billion. In the first quarter of 2010, LPS reports that revenues grew 45 percent.

But while it’s hauling money in the front door, federal prosecutors are also sniffing around in the stacks. LPS reported in its annual securities filing in February that a subsidiary of the company is under investigation by federal prosecutors. Docx LLC produces documentation for banks, basically to show that they own the loan they are foreclosing on.

LPS is the largest loan servicer in the country so they have to keep track of a lot of loans, loans that have changed hands numerous times as they were packaged into securities, sold as investments, split up, sliced, diced and chopped yet finer again. LPS’s much-touted software program allows the company to continue to service a loan as it changes hands.

But producing the essential paperwork necessary to prove ownership of the loan when it’s time to foreclose has proven problematic for many lenders. That documentation has proved to be plain wrong or just inadequate. An affidavit of lost note is not the same as the actual note.

The federal investigation into Docx LLC gives the impression that the handling of these documents occurred in an culture of strange almost flippant arrogance. In numerous cases, Docx listed the owner of the loan as “Bogus Assignee.” Some foreclosures have actually been filed, including one in Nassau County, where Monsieur Assignee was listed as filing the foreclosure complaint.

LPS has explained that the ironic terminology, ironic considering many foreclosure defense attorneys say proof of loan ownership proffered in court is often bogus, as a designation used as a placeholder in master documents. When the foreclosure was filed, Docx employees must have neglected to add the name of the proper loan holder to the foreclosure.

— Susan Eastman