Foreclosure contractors face new scrutiny from states
While federal and state officials investigating flawed foreclosures  have largely focused on holding the banks accountable and bringing relief to wronged homeowners, officials in a few states have begun targeting the more obscure middlemen of the foreclosure scandal.
Prosecutors in California and Illinois have sent subpoenas  to Lender Processing Services, one of the largest firms that processed mortgage documents for the banks. (Read more about LPS in our guide to who’s who of the foreclosure scandal .)
As we’ve noted , the firm—which helps handle more than half of all U.S. mortgages —has been accused of using the same “robo-signing ” practices as the major banks, such as signing and notarizing documents that appeared inaccurate or invalid. Bank employees have testified under oath that they relied on LPS to vet the information  in foreclosure documents.
LPS has had its share of legal troubles over its mortgage processing. Michigan’s attorney general announced an investigation last month  into potentially fraudulent mortgage documents processed by an LPS subsidiary. (LPS has said that it discontinued  the practices used by the subsidiary.) Along with the big banks, the firm recently received an order from federal regulators to correct problems with its processing of mortgage documents. (Read that consent order .)
Illinois Attorney General Lisa Madigan also sent a subpoena to Nationwide Title Clearing, another firm contracted to provide mortgage services to banks. As we’ve noted , Nationwide Title Clearing employees have testified to robo-signing thousands of mortgage documents—known as assignments—that establish the ownership of a mortgage loan and are key to establishing who has the right to foreclose on a homeowner.
Nationwide Title Clearing said in a statement that its procedures have been “thoroughly audited and examined for accuracy ” and that it would cooperate with any investigation. LPS declined to comment.
The latest actions on foreclosure problems as an attempted comprehensive settlement by all 50 state attorneys general has hit a few roadblocks. As we noted in our cheat sheet on bank investigations , the negotiations have been hampered by disagreement with the banks over the size of penalties as well as some disagreement among the attorneys general—at least eight of whom have opposed any settlement that would require banks to cut borrowers’ mortgage debt.
Bloomberg reports that Bank of America has also received independent scrutiny  from the attorneys general of Utah and Connecticut accusing the firm of invalid foreclosures  and insufficient loan modifications . Utah warned that it would sue .