Kerri Panchuk, Housing Wire
The alleged splitting of attorney fees between foreclosure law firms and third-party mortgage servicing providers is the subject of another lawsuit, bringing the number of cases filed on this issue to five within the past seven months, said Nick Wooten, an Alabama-based plaintiff’s attorney involved in all of the cases.
By mid-May, Wooten said he expects to file 10 to 12 additional cases, making similar allegations about what he claims are illegal, split-attorney fee arrangements between mortgage servicing outsourcers and law firms. The cases are concentrated in the Northern District of Mississippi, the Southern District of Alabama and the Northern District of Florida-Pensacola division.
The latest case involves plaintiff, Susan Marie Harris of Florida, against Lender Processing Services (LPS: 28.41+0.11%), its subsidiary LPS Default Solutions Inc., and the Ben-Ezra & Katz law firm.
Harris, who is seeking class-action status of her lawsuit, claims the defendants violated bankruptcy code by creating contractual agreements that allowed them to “illegally split attorney’s fees” with law firms that signed up to join LPS Default Solutions’ attorney network.
Harris alleges the defendants set up a contractual arrangement in which attorneys in the LPS network compensated LPS Default Solutions by splitting attorney’s fees with the outsourcer. Because of this compensation model, the plaintiff contends LPS was able to offer its clients — namely large mortgage servicers – some services free of charge, expanding its competitive positioning in the default servicing marketplace.