Class Action Suit Alleges Conspiracy To Squeeze Bankrupt Homeowners In Foreclosure; Fidelity An Alleged "Secret Puppetmaster" Of Creditors' Lawyers

In Houston, Texas, The Associated Press reports:

• Homeowners have sued Fidelity National Information Services Inc., a giant financial data-processing company, accusing it of raising the price that cash-strapped consumers must pay to avoid foreclosure of their homes. The lawsuit, filed Jan. 16 in the U.S. Bankruptcy Court in Houston, contends that Fidelity has conspired with mortgage-servicing companies and law firms to "add to the indebtedness" of homeowners by tacking on secret fees that remain undisclosed for years.

• "The fees the Fidelity-controlled law firms charge in Chapter 13 bankruptcies are inflated by 25 percent to 50 percent," the lawsuit asserts. The law firms, it says, then "kick back" the extra amount to Fidelity under a formal agreement under which the law firms' fees are set. "Fidelity keeps its role, as well as the kickback, hidden from the courts as a matter of systematic policy."

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• Fidelity counts Washington Mutual and Bank of America among the biggest clients of its default-management services. The company says it handles default mortgage servicing for 22 of the top 25 residential mortgage servicers, and 13 of the top 25 subprime servicers.

For more, see Suit claims Fidelity abuses homeowners.

Editor's Note:

The lawsuit also describes Fidelity's alleged role as follows (page 5, paragraph 21 of lawsuit):

• [F]idelity’s “comprehensive” role is really that of secret puppetmaster of the law firms that appear in [the Houston Bankruptcy] Court on behalf of mortgage servicing lenders. These law firms (in the Harrises’ case, Mann & Stevens, P.C.) collect their fees by tendering their bills through Fidelity and then on to the mortgage servicer – in this case Saxon, which then charge debtors, like the Harrises, without ever obtaining this Court’s
  approval.

To view the entire lawsuit, see Harris vs. Fidelity National Information Services Inc.

Go here to download Misbehavior and Mistake in Bankruptcy Mortgage Claims, a recent report on the conduct of some lenders in court proceedings when homeowners file for bankruptcy protection (by Katherine M. Porter University of Iowa - College of Law).

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