Legislative deliberations continued Tuesday over a bill that seeks to prevent financial institutions accused of defrauding their customers from pulling legal disputes out of the state court system and into private arbitration.
- Wells Fargo has lost the contract it held for Philadelphia’s $2 billion payroll account.
- The bank’s public standing continues to suffer even as it has sought to correct problems tied to the fake-account scandal.
Efforts by Wells Fargo to move beyond its bogus accounts scandal have been set back by the loss of a big government contract.
The Philadelphia City Council voted Monday to change handlers of its $2 billion payroll account, according to published reports. Instead of continuing the arrangement with Wells, the city chose to hire Citizens Bank for the next fiscal year starting in July.
In a 5-3 decision on Monday, the U.S. Supreme Court determined that cities can sue banks over lost tax revenue on foreclosed properties from urban blight. Law360 reported that Miami has the standing to sue Bank of America Corp. and Wells Fargo & Co. under the Fair Housing Act, stating that the banks’ discriminatory and predatory lending practices led to a major shortfall in city tax revenues.
The final ruling is not up to the high court, however, as the Supreme court sent the case back to the Eleventh District, in order to determine whether the banks’ lending practices were “proximate cause” for the damages. Law360 reported that all eight justices rejected the probable cause argument.
“The ruling is clearly a concern for lenders who believed cities did not have sufficient standing in order to assert claims that are more appropriate to be brought by the ultimate aggrieved parties, which should be the borrowers, assuming of course the allegations are true,” said Shaun K. Ramey, Shareholder, Sirote and Permutt, P.C. “That being said, although the Court granted cities the right to file suit, they set a high bar for proving proximate causation so the impact of the Supreme Court’s decision may not be as broad as it appears at first blush.”
Ocwen fought back against Massachusetts’ regulations, asking a court to restrain the state’s cease and desist order because it would “cause significant harm” to its customers in the state.
But, the Division of Banks isn’t the only Massachusetts governmental entity that is now targeting Ocwen.
Recently, Massachusetts Attorney General Maura Healey announced that the state is suing Ocwen for widespread “abusive” mortgage servicing practices.
According to Healey’s office, Massachusetts’ lawsuit claims that Ocwen charged homeowners in the state for “unnecessary and expensive force-placed insurance policies, imposed excessive fees on delinquent borrowers, and failed to properly process escrow and insurance payments.”
Massachusetts’ complaint also claims that Ocwen failed to respond to borrower disputes about their accounts and to correct account errors.
Healey’s office alleges that Ocwen’s “servicing failures” increased Massachusetts’ borrowers’ mortgage and insurance payments, put borrowers at risk via lapses in insurance, and pushed borrowers into delinquency and foreclosure.
According to details from Healey’s office, Ocwen “has consistently fallen short” in its servicing operations in a number of ways, including (charges directly from Healey’s office):
- Funneling fees and commissions: Ocwen arranged for commissions and other fees to be paid to companies related to Ocwen, even though those companies did little or no work, resulting in higher charges to Massachusetts borrowers
- Improperly administering insurance premiums: Ocwen failed to disburse borrowers’ escrowed insurance premiums to insurers, causing their insurance policies to lapse, leaving them exposed to serious gaps in insurance coverage. The force-placed policies that Ocwen then puts in place are very expensive, carry high deductibles, and do not provide critical liability and personal property coverage
- Unnecessary flood insurance: Ocwen force-placed borrowers in expensive flood insurance policies for time periods when properties were not in special hazard flood area and did not require flood insurance
- Duplicative insurance policies: Ocwen force-placed certain borrowers who already had insurance coverage, either through their own homeowners’ insurance or through other policies that Ocwen itself had acquired on behalf of the borrowers
- Charging inflated and duplicative default-related fees: Ocwen took advantage of struggling borrowers by ordering unnecessary and duplicative title search, property inspection and landscaping services and then passing the costs on to the borrower
Healey’s lawsuit also accuses Ocwen of overcharging borrowers and failing to give them the necessary information to understand or dispute inappropriate charges.