L. Walter Quinn III and Terry Quinn obtained a home mortgage from Provident Bank. They also signed an automated clearing house (ACH) authorization permitting Provident “or its successors and assigns” to automatically withdraw the monthly mortgage payment from their account at another bank.
The ACH authorization read: “I am responsible for making payments on the note by other means if my payment is not drafted on the day specified no matter the cause.”
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Several months later Provident Bank sold the Quinns’ mortgage to Wells Fargo, which hired Ocwen Federal Bank to service the loan and collect the payments. The Quinns did not sign another ACH with Ocwen, but they demanded Ocwen use the ACH to make the monthly mortgage payments.
Ocwen refused to do so unless the Quinns signed a new ACH agreement, which they refused to do. The mortgage eventually fell five months in arrears. Wells Fargo ordered its law firm, Wilson and Associates, to begin foreclosure. A Notice of Default and Intention to Sell were recorded against the Quinns’ home.
The Quinns refinanced with another lender so the foreclosure sale was not held. Later, the Quinns sued Ocwen for breach of contract, negligence, defamation, violation of the Federal Fair Debt Collection Practices Act, and equitable relief to remove a cloud on title.
If you were the judge would you order Ocwen Federal Bank to pay damages to the Quinns?
The judge said no!
The original ACH agreement, the judge began, was between the Quinns and Provident Bank. Although it could be transferred to Ocwen, that was never done by Provident so Ocwen had no contractual responsibility to take the monthly payments from the Quinns’ bank account, the judge explained.
As for the negligence claim, since there was no new ACH agreement the Quinns cannot show Ocwen had a legal duty to debit the Quinns’ bank account each month, he emphasized.
After the mortgage was five months in default, Ocwen reported credit information to the three national credit agencies — TransUnion, Experian, and Equifax — the judge noted. There was nothing illegal in doing so because “truth is a complete defense to a charge of defamation,” he noted.
As there was no privity of contract between the Wilson law firm representing Wells Fargo (which owned the mortgage) and the Quinns, there was no liability for the filing of the Notice of Default and Intention to Sell, the judge ruled.
Lastly, Ocwen was merely the mortgage loan servicer, and it was mortgage owner Wells Fargo that had the obligation to clear the mortgage from the Quinns’ title so Ocwen had no duty to do so, he noted. Therefore, loan servicer Ocwen Federal Bank had no liability to the Quinns, and the case is dismissed.
Based on the U.S. Court of Appeals decision in Quinn v. Ocwen Federal Bank, FSB, 470 Fed.3d 1240.
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