Peg Brickley, Wall Street Journal

A federal appeals court has reinstated sanctions against a New Jersey law firm and attorney for attempting to foreclose on a suburban Philadelphia couple using “robo-produced” mortgage data that was fraught with errors.

In a case that was one of the first to expose trouble in the high-tech, high-volume mortgage foreclosure industry, the Third U.S. Circuit Court of Appeals sided with a bankruptcy judge who punished the Udren law firm and attorney Lorraine Doyle for showing up in court with unverified, computer-generated mortgage data that was wrong.

A call to Doyle and to the firm Thursday seeking comment on the ruling was not returned.

The wave of mortgage foreclosures that followed the collapse of the housing market brought to light the industry practice of having clerical employees “robo-sign” mass-produced mortgage documents. Robo-signers presented themselves as officers of numerous banks, swearing to information they had never checked out. Exposure forced the mortgage servicers to shut down foreclosures for awhile for document repairs.

The Udren case highlights the role of foreclosure law firms, whose lawyers walk the robo-produced mortgage data into court, without checking whether it is correct or not. The law firm said it was not able to verify the data under the system established by client HSBC, using technology from Lender Processing Services Inc.

HSBC did not appeal sanctions imposed on it for using a system that did not allow its lawyers to check on the truth of the computer-produced data. LPS, a major provider of technology and services to the mortgage industry, was not sanctioned in the case before the Third Circuit.

“However, both the accuracy of its data and the ethics of its practices have been repeatedly called into question elsewhere,” the appeals court noted, citing cases in Louisiana, Mississippi and South Dakota.

A spokeswoman for LPS did not respond Thursday to a request for comment.

The appeals court and the bankruptcy judge found the flawed high-volume system that handles mortgage data does not excuse an attorney’s failure to verify information before presenting it to a court.

“Where a lawyer systematically fails to take any responsibility for seeking adequate information from her client, makes representations without any factual basis because they are included in a ‘form pleading’ she has been trained to fill out, and ignores obvious indications that her information may be incorrect, she cannot be said to have made reasonable inquiry,” the court of appeals wrote.

The case began in January 2008, when the Urden firm presented a bankruptcy judge with the wrong mortgage note, wrong monthly payment information and wrong value for the home of Niles and Angela Taylor, and sought permission to foreclose.

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