American Home Mortgage Servicing (AHMSI) has filed a lawsuit in District Court in Dallas County against Lender Processing Services (LPS) and its affiliate DocX to recoup millions of dollars in claimed losses.

The Coppell, Texas-based mortgage servicer said it has attempted to negotiate a settlement with the nonbank servicing vendor for over a year, but the two sides could not reach an agreement, leading to this lawsuit.

In the suit, AHMSI claims that it has suffered, and continues to suffer, millions of dollars in losses due to LPS and DocX's improper execution, notarization, and recording of mortgage assignments that affected more than 30,000 residential mortgages across the country.

From April 2008 through November 2009, DocX prepared, executed and recorded lien releases and mortgage assignments for AHMSI. During this time, the board of directors at AHMSI appointed certain DocX and LPS employees as “special officers,” which gave these individuals the right to execute mortgage-related documents.

But from March 2009 through October 2009, the suit says LPS told AHMSI that “surrogate signers” who were not designated as “special officers” completed a significant number of mortgage assignments where they signed the name of one or more of the special officers on a mortgage document.

AHMSI said it was not aware of the surrogate signing practices conducted by LPS and DocX.

“Upon learning of this unauthorized use of surrogates, we terminated the services of DocX and promptly conducted an extensive, 50-state remediation effort to address any issues caused by this problem,” said Jordan Dorchuck, chief legal officer for AHMSI. “Our remediation efforts are, and have been, focused on correcting affected assignments of mortgage to ensure they comply with all local, state and federal laws.”

AHMSI is seeking to recover from LPS and DocX reimbursement in the amount that the servicer lost as a result of the breach of contract.

At press time, Jacksonville, Fla.-based LPS could not be reached for comment.

This is not the first time the nonbank servicer and its subsidiary have had issues complying with industry regulations. In June, Michigan Attorney General Bill Schuette issued subpoenas against both companies pertaining to questionable mortgage documentation filings.

Last November, DocX was also investigated by the Florida Attorney General's Office for allegedly forging documents so foreclosures could be processed more quickly.

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