Blog & Legal Updates

Mortgage Fraud Update: Ocwen Ordered to Cease & Desist Mortgage Servicing and Debt Collection by the Massachusetts Division of Banks

MORTGAGE UPDATE: The Massachusetts Division of Banks has issued a Cease & Desist Order and Demand for Order to Show Cause against one of the largest mortgage servicers in Massachusetts and the country: Ocwen [Ocwen Financial Corporation].  NYSE Stock ticker OCN.  On April 20th, the date the Division of Banks issued its Cease & Desist Order [along with 20 other states], Ocwen’s stock suffered a significant loss as shareholders and hedge funds that invest in mortgage-servicing have downgraded the stock. 

The eighty-three (83) paragraph demand contains a recitation of fraudulent activities, failure to keep accurate records, instances of inflated fees, inappropriate escrow charges, and many other consumer protection violations that have harmed homeowners over the last many years of servicing and debt collection in Massachusetts.  Specifically at the end of the demand, the Mass. Division of Banks Orders Ocwen to do the following:

  1. Within 30 days of this order, Ocwen shall seek the Division’s approval by submitting in writing the licensed loan servicer(s) to which Ocwen intends to transfer all of its mortgage servicing and debt collection activities.  Ocwen may transfer its mortgage servicing rights or may engage sub-servicer(s);
  2. Within 120 days after the Division’s approval of transferee loan servicer(s), Ocwen will effectuate the transfer all of its mortgage servicing and debt collection activities; and
  3. Ocwen will transfer all of its mortgage servicing and debt collection activities in a manner compliant with all federal and state regulations, including but not limited to the Real Estate Settlement Procedures Act (RESPA).

To read the Cease & Desist Order, click here: Mass. Division of Banks Order to Cease & Desist Against Ocwen

Since the Order was delivered on April 20th, 2017, the Division of Banks has released a Fact Sheet providing reasoning, guidance, and the statistics about Ocwen and the reasoning for the Cease & Desist Order.  To read the Fact Sheet, click here: Fact Sheet re: Ocwen by Division of Banks

It is uncertain at this point whether or not Ocwen will file suit in U.S. District Court of Massachusetts (Federal) or Suffolk Superior Court (State Superior) and seek injunctive relief to prevent this order from going into effect, etc.  What is almost certain, however, is that on some level, Ocwen will seek an extension of time to battle the order and seek additional time to transfer significant data/files/mortgages to other services.  The Cease & Desist order comes as the Consumer Financial Protection Bureau institutes stricter rules and regulations to prohibit mortgage fraud, abuse to homeowners, and the illegal debt collection of inflated or inappropriate fees.

The Division of Banks has the power to revoke a license to service mortgages in Massachusetts, and the Office of Consumer Affairs and Business Regulation has the power to revoke the license and ability to collect a debt from Ocwen.  By revoking these two incredible lucrative and powerful licenses, Ocwen would be powerless in Massachusetts (and potentially the other 20 states where similar cease and desist orders were served upon Ocwen).  Ocwen makes its money by servicing mortgages – accepting payments, creating and sending mortgage account statements to homeowners, charging fees for servicing mortgages, and ultimately passing the collected payments to securitized mortgage trusts (massive conduits that contain bundled mortgages packaged together by Wall Street investment banks).

What Should the Massachusetts Homeowner Do Next?

  1. If you have received (ever or recently) a mortgage account statement or notices regarding your notice from Ocwen Loan Servicing, you should carefully review your statements and payment history for errors.  Specifically, Ocwen has a history of misapplying mortgage payments (not crediting payments to your principal and interest or overall balance), charging fees for inspections that never occurred, and charging large escrow fees for homeowner’s insurance of real estate taxes even if the homeowner is paying them.
  2.   If you suspect issues with your mortgage servicing, you should contact your mortgage servicer with a notebook and pen and take down the name, employee ID number and contact info of the representative you speak to, and take detailed notes regarding your mortgage, the questions you ask, and the answers you receive.  Remember, many of these phone calls are recorded so don’t be afraid to ask the hard questions, ask for a full updated accounting and question your mortgage company.  Write down their answers and statements because it can be used against them later.
  3. If after doing the above, you still suspect mortgage fraud or issues exist with your mortgage or mortgage servicing, you should contact the Firm by calling (617) 765-4429 – Alex R. Hess Law Group.

How Can Massachusetts Residents or the American Homeowner Protect Their Finances?

  1. Check your Investments.  Now is an excellent time to review your holdings in 401(k)s, brokerage accounts, stock investments, pensions, and see if you have a stake in Ocwen Financial Corporation [NYSE: OCN].  The future for Ocwen is uncertain.  If the orders to cease mortgage servicing prevail, the company will lose a significant amount of money, and the stock will suffer.  If Ocwen chooses to battle the orders, it will spend millions in legal fees in 20 different states battling the Attorneys General and proving wrong the mortgage fraud audits already conducting against Ocwen.  Whether or not the outcome of complex mortgage fraud litigation, and the uncertainty of a jury trial or judge’s decision, what could be certain are the large legal bills.
  2. Check your Mortgage.  Re-examine your mortgage (even if not serviced by Ocwen) for unauthorized fees, unapplied or misapplied payments, or expenses for taxes or insurance that you have paid.

Given the above information, and the billions of dollars at stake in collecting mortgage payments from Massachusetts homeowners, this Cease & Desist Order by the Mass. Division of Banks against Ocwen could shut off the faucet of money to the large finance company.   More importantly, it could provide serious protections for the Massachusetts homeowner.  If you suspect mortgage fraud with your account, please contact the Firm at (617) 765-4429 or by submitting the contact form below.

Non-Compete Law Changes: Joint Committee on Non-Compete Law Ironing Out Final Law

The Joint Committee on Non-Compete Reform, made up of both state Senators and Representatives are now noncompeteironing out the final details on Non-Compete Law reform in Massachusetts, and it result in significant changes in many key industries.  Start-ups, Technology and the BioPharam industry, software sales, and healthcare (hospitals, doctors, nurses, etc.) all rely on non-compete agreements to retain top talent, and prevent poaching and sabotage from the inside.  In fact, non-competes many times factor into an employee’s employment agreement.  The previous test under Massachusetts law – “what is reasonable given the industry, job position, management responsibilities, role, customs for that position, and usually not more than 1 year” – is changing.  Specifically, H. 4434 (House version of the noncompete reform bill) was passed on June 29, 2016.  The Senate Version, a much more strict version, was passed on July 14, 2016 and, provides for the following:

  • TIME LIMITS: Non-competes would generally be limited to 3 Month periods, instead of the usual 1 Year.  This new strict limit could have significant limits on employers hiring and retaining top talent in competitive industries, especially since most employment contracts are annual (or renewable one-year periods), not 3-month periods.
  • GARDEN PAY: (Pay the Employer must Pay the non-working former employer who is abiding by the non-compete and is restricted from working): Following the employee’s departure, the Employer must pay Garden Pay of 100% of the employee’s highest annualized earnings over the past 2 years.  Certainly employer’s are not happy about having to pay a full year salary for an employee who chooses not to work – the possibilities for abuse of this garden pay provision are high and despite objection from employers, the Massachusetts Legislature (in its infinite wisdom) has decided to force employers to pay an employee’s salary when he is not working under a noncompete agreement.
  • PREVENTING JUDICIAL REFORM: The bill specially prohibits a Judge or Court to reform overbroad noncompete provisions.  Currently, Judge’s can rewrite and tailor noncompetes to make them more reasonable.  The new reform strips judges (who are likely in the best position to do so) of offering this relief to create reasonable circumstances.
  • 10 DAY NOTICE: Employers would be required to inform employees in writing within 10 days of termination of the employer’s intent to enforce the noncompete.
  • EXEMPT PERSONS: Persons making under $125,000.00 annually would essentially be exempt from the non-compete law reform.

Massachusetts lawyers, employers, and employees should all recognize that these sweeping changes could have a significant impact on your current non-compete cases, agreement, employment agreement, and what relief a Court can provide.  It also could have a significant on your ability to be paid (Garden Pay) while you are hindered or restricted from working under a non-compete.

While the Senate Bill (much harsher) was amended after the House Bill was passed, the Bill must now go to a Joint Committee, made up of both House and Senate Members, to come to an agreement on a final version of this reform bill.  All indications show that this bill could be presented and passed sometime in August 2016, and go into effect as early as October 1, 2016.

While the changes are not retroactive, any agreement entered into on or after October 1, 2016 could be implicated.  Why is this important?  Because you could currently be an employee in negotiations or in the process of accepting a job offer with an employment contract and accompanying non-compete agreement presented on October 1, 2016 or after.  If that happens, your agreement is governed by the new law (above), not the previous law.

While Massachusetts considers itself progressive, and presents this bill in a way that protects employees from harsh noncompete agreements, the truth is the reform may not offer employees much protection except for Garden Pay if they are truly unable to work at all during their restricted period.  Lower wage earners and what most refer to as “Non-Executives” making less than $125,000 a year seem to be exempt for the most part, which certainly helps persons who usually are not in a position to negotiate heavily or afford to turn down a job offer.  The reform will certainly make its way to the Courts eventually, and the first few decisions issued by the Superior Court could set new law in Massachusetts, interpreting a bill that for the most part, is new territory for Massachusetts parties and courts.

 

Massachusetts Non-Compete Law: What You Need to Know

Massachusetts Law on Non-Compete Agreements:

Massachusetts Law on Non-Compete Agreements is well-settled, yet does not exactly provide the finality and “yes or no” answers we are often asked as attorneys.  Specifically, a non-compete in Massachusetts is valid and enforceable if it is reasonable.  What’s reasonable?  Well, that depends on a case by case basis.  A case by case review requires a detailed analysis of the contract, the employment or relationship between the parties, the bargaining powers (big corporation vs. low-level employee) and what is the basis for the non-compete in the first place.  The Massachusetts Supreme Judicial Court stated the non-compete test in 1961 case Novelty Bias Binding Co. v. Shevrin:

“It has been long settled in this Commonwealth that a covenant inserted in a contract for personal service restricting trade or competition or freedom of employment is not invalid and may be enforced in equity provided it is necessary for the protection of the employer, is reasonably limited in time and space, and is consonant with the public interest. What is reasonable depends on the facts in each case.”

 

Massachusetts Non-Compete Special Interests & Considerations:

Business People Working Outdoors with Work Related Images Above
Massachusetts Innovation Relies Upon Non-Compete Agreements

Massachusetts is unique, and our state is positioned quite differently than others because of the following industries: Healthcare, Technology & Start-Ups, and Higher Education.  These are the three top thriving industries in the Boston area, and they have an interest in using non-competes to retain top talent (Harvard, MIT, etc.) and not allowing those top employees to compete and steal business.  Non-competes are the most often used vehicle to protect a business, retain top employees and prevent stealing business secrets and clients.  However, what is “reasonable” will be determined by a Court and depends on the specifics of a case.

The Massachusetts legislature stepped in to prevent non-competes for Physician/Doctors, Nurses, and Psychologists.  [M.G.L. chapter 112].  As a result of lobbying and protection of the public health, doctors and nurses lobbied Congress to prevent non-competes for doctors and nurses, and allow these healthcare professionals to move between jobs without limitations or restrictions because of non-competes.  However, other industries do not have these statutory protections.

The White House’s Position on Non-CompetesWhite House Report on Issues with Non-Compete Agreements

Many employers rely upon non-compete agreements for all employees, both executives and low-level wage employees.  The differences are apparent however: low level employees (as opposed to executives or management) do not usually have access of trade secrets or confidential client relationships, and do not possess the bargaining power or ability to understand the implications of a non-compete agreement.   Potential Employees also have less bargaining power or leverage to negotiate when the non-compete agreement follows the employment agreement.  At this point, the new employee may have already begun working and rejected other job offers.  While Massachusetts gives the parties the right to enter into contracts, New Hampshire law states that where already accepted employment is then made conditional upon a future non-compete agreement, that agreement will be void.  The so-called “bait and switch” is harmful to employees and against public policy.  [N.H. Senate Bill 351, 2014].

What Should Employees or Executives Do When Presented with a Non-Compete Agreement?

Have an Attorney review the agreement.  The only true way to equal the playing field is to be represented by counsel, and potentially negotiate a more favorable employment/non-compete agreement.  This is not always an option, but many non-compete agreements are drafted by an employer’s lawyers.  The only real way to understand the limitations, legality, and most importantly the enforceability of a non-compete agreement is to have a lawyer perform a review.  The enforceability of a non-compete depends upon an analysis of all the facts and circumstances.

If you have a non-compete agreement and have questions over the enforceability of that clause, or have been fired and have questions over your rights and ability to obtain new employment, please feel free to contact my office to schedule a consultation.

 

Massachusetts Selected Case Excerpts:

Boulanger v. Dunkin’ Donuts, Inc. , 442 Mass. 635 (2004)
Under the circumstances, “covenants not to compete signed by the plaintiff as part of his franchise agreements with the defendant were enforceable.”

F. A. Bartlett Tree Expert Company vs. Barrington , 353 Mass. 585 (1968)
This case sets the standard for the material change doctrine “where it appeared that after working under that contract for some years the salesman’s remuneration and sales area were changed substantially…”

Invidia, LLC v. DiFonzo  (Mass. Superior Court, Middlesex, Oct. 22, 2012), Memorandum of Decision and Order on Plaintiff’s Motion for Preliminary Injunction, Wilson, Paul D., J.)
Hairdresser posting news of job change on Facebook is not solicitation of former employer’s customers

Marine Contractors Co., Inc. v. Hurley , 365 Mass. 280 (1974)
“Agreement not to compete with Marine was reasonable in time and space.”

All Stainless, Inc. v. Colby , 364 Mass. 773 (1974)
“A covenant not to compete contained in a contract for personal services will be enforced if it is reasonable, based on all the circumstances.”

Richmond Brothers, Inc. v. Westinghouse Broadcasting Co., Inc. , 357 Mass. 106 (1970)
An employer is not entitled to protection against ordinary competition

Novelty Bias Binding Co. v. Shevrin , 342 Mass. 714 (1961)
“It has been long settled in this Commonwealth that a covenant inserted in a contract for personal service restricting trade or competition or freedom of employment is not invalid and may be enforced in equity provided it is necessary for the protection of the employer, is reasonably limited in time and space, and is consonant with the public interest. What is reasonable depends on the facts in each case.”

New England Tree Expert Co., Inc. v. Russell , 306 Mass. 504 (1940)
“It is settled in this Commonwealth that such contracts are divisible and will not be enforced as to any parts of the covenant that are not reasonably necessary for the protection of the good will of the employer’s business.””What is reasonable depends upon the facts in each case”

Uber has Shared Ride Information and Patterns of Over 14 Million App Users

To date, Uber has shared ride data and trip patterns of over 14 million App Users with government agencies.  Tech Crunch recently dissected a uber_animated-gif“Transparency Report” published by Uber in response to requests from users as to whether their personal information, or ride trip patterns, were provided to the government in any form.  Privacy is always a concern to app users, however, on many occasions apps collect users’ credit card, debit card, contact lists, cell phone pictures, track locations, and provide this cached info to the government.  Uber has since attempted to show transparency in their report, and also claims that the information provided was either required disclosures or in response to government agency requests.  As claimed in Uber’s statement, this information was shared in response to official requests from government regulatory agencies (such as departments of transportation or public utility commission), or law enforcement agencies.  Tech Crunch Article: Uber Shared 14 Million Users’ Info with the Government.  The report has been published and made available here: UBER TRANSPARENCY REPORT.

In response to concerns about protecting ride/app user’s privacy and personal information, the ride-share app commented that the information provided to the government was either required, or in response to “blanket requests without explaining why the information is needed, or how it will be used.”  Uber actually released the transparency report in response to criticism over right to privacy concerns and user’s complaints and worries about sharing their private information (considering that many app users have personal debit cards or credit cards synced with the app).

Law enforcement requests make up only a small portion of the total number revealed by Uber — 469 in total from state and federal agencies.  Uber says most of the data sent to law enforcement is for investigations into credit card theft and fraud.  The company also introduced a “warrant canary” into its transparency report, stating that, as of today, it has not received a National Security Letter or FISA court order.

A quick view of the report shows that no one from Boston or Massachusetts seems to be affected.  However, this could change since law enforcement could catch wind of the App, and other Apps, that collect location and personal information/pattern data.

 

 

New York Bankruptcy Judge Discharges “Bar-Study” Loan in Law Grad’s Bankruptcy

discharging-student-loans-in-bankruptcy

In general, student loans are not dischargeable in Bankruptcy – no matter the Chapter (7, 11, or 13).  However, in small test cases across the country, Bankruptcy Judges are providing small victories to Debtors with student loan debt along the way.

Under the “undue hardship” test that currently exists, unless you are incapable of obtaining any employment or are a quadriplegic and disabled to the point you can never work again, your student loans are exempt from a bankruptcy discharge, and will survive the bankruptcy case.  However,  Bankruptcy Judge Carla Craig of Eastern New York (Brooklyn) discharged a $15,000 Citibank “Bar-Study Loan.”  A Bar Study Loan is a living expense loan that law school graduates borrow to help them pay everyday living expenses and courses to study for the bar (not law school courses, but private bar prep for the bar exam).

In the grand scheme, most lawyers graduate law school with over $100,000+ in student loans.  So this loan of $15,000 may not be a huge portion of the debtor’s overall debt, but every little bit helps.  For quotes from Judge Craig’s decision, see Abovethelaw: Broke Law Grad Gets Bar-Study Loan Discharged in Bankruptcy

SUPREME COURT RULING: Public Employee Unions Can Still Collect Mandatory Union Fees

Teacher Protests outside the Supreme Court during oral arguments of the California Teacher's Union case.
Teacher Protests outside the Supreme Court during oral arguments of the California Teacher’s Union case.

The Supreme Court held in a 4 – 4 Split decision (there are currently only 8 justices until a new 9th Justice is confirmed by the Senate Judiciary Committee), that the State of California Teacher’s Union can collect mandatory union fees from its teachers – public employees.  The Court below, the Ninth Circuit Court of Appeals, ruled that the California Teacher’s Union can use its current system to collect mandatory union fees from California teachers.  Without a majority of the court overruling the decision, the lower court’s ruling stands and the current union fee collecting system remains in place.  Huffington Post article:  Labor Unions Dodge A Bullet at Supreme Court

The Case, Friedrich v. California Teacher’s Union, a group of teachers argued that being forced to pay their “fair share” fee to cover the costs of collective bargaining and fund the union/union reps, violated their First Amendment Rights.  Specifically, the teachers argued that since the union was inherently political, it violated the teacher’s freedom of politics/association provision of the First Amendment.

Many states currently require public employees to pay mandatory union dues, often referred to as “fair share” dues, even if the employees want to opt out or remain independent from the union.  Many unions do not allow them the option, and thus, they must pay the union dues.