A Different State Farm Battle

State Farm has another battle on its hands and this one has morphed into a constitutional battle. This battle is with a whole group of State Attorney Generals and State Banking Officials of the twelve states that regulate mortgage brokers.

The case started with State Farm trying to finagle its way around some requirements in the State of Ohio, that were put in place to reign in some of the worst excesses of the current lending mess.

You see, State Farm has a bank. A thrift to be exact. And it likes to offer loans, and other banking products to its insurance customers. But the people that they do this through are not employees of State Farm. They are the various independent agents (as State Farm likes to call them) that run State Farm offices.

Ohio’s Bank Supervisor said “If they are independent, then they are brokers. And if they are brokers, they must license as mortgage brokers and follow our laws.” We would like to know who the are and that they have a clue what they are doing. State Farm did what any business that wants to avoid regulation in this day and age does: they went to their friendly do-nothing federal regulator and got a letter from the Chief Counsel of the Office of Thrift Supervision (OTS) saying that State Farm independent agents were exempt from state regulation.

Now it should be understood that FEDERAL courts do not normally pull back the reigns on FEDERAL agencies. But the Federal District Judge Edmund A. Sargus had a very hard time understanding the methodology of State Farm and the OTS. In his opinion and order he noted that a letter from the chief agency’s attorney hardly complies with the Administrative Procedures Act as set out by congress. He goes on to note that at no time prior had the OTS had any interest in the area of regulating mortgage brokers and that for the State of Ohio to hear about it for the first time when State Farm hands it a letter from the OTS is a little bit unusual.

So the Judge ruled against State Farm in their request for a declaratory judgment. State Farm has taken the case to the 6th Circuit Court of Appeals. We are currently at the point where various parties are submitting their amicus briefs. The OTC has already filed one for State Farm, and it is expected that various State Attorney General Offices, and some group from the Conference of State Banking Supervisors will submit one for the State of Ohio.

While we wait for the dust to settle, I am curious as to one point: I understand why The Federal Reserve Bank (The Fed), the Office of the Comptroller of the Currency (OCC), and OTC have done nothing to reign in the current mortgage mess. But why do only twelve States regulate mortgage brokers?

In case the link above doesn’t work here is the url: http://www.goodwinprocter.com/Files/CFSA/07/rm_07_10_9_Ohio.pdf

5 thoughts on “A Different State Farm Battle”

  1. Excellent points Russell and another example of what happens when the government does not hold businesses to minimum standards. If subprime lenders had been held to some minimum standards like banks in their lending and oversight this subprime debacle may have been avoided.

    State Farm bank shows up in the racketeering lawsuit filed down here. It was that institution that seeded the engineers with money to begin down here. It also provided a point of leverage for State Farm over these firms.

    sop

  2. I guess they didn’t consider the fact that insuring a house that they also hold the mortgage on gets you into some interesting situations.

    Sounds like the insurance end won the argument in MS.

    Countrywide does the same thing from the opposite direction. They put insurance on the home loans they make. Of course their biggest problem at the moment isn’t with a hurricane, but with the fact that 1/3 of their sub-prime loans are in default as of years-end.

    http://www.reuters.com/article/marketsNews/idUKWEN362420080129?rpc=44

  3. The “insurance end” wins all the arguments in Mississippi pardner. Them boys own the commissioners office lock stock and barrel.

  4. Pursuant to an investigation into personal injuries sustained in an automobile accident, adjuster Vanessa Ennis (State Farm) hired Dr. Charles F. Nicol of Marietta, GA (International Health Consultants) to review a large number of my medical records to determine if my medpay should pay out. The medpay did pay out the 25K, however, in a letter back to Vanessa Ennis of State Farm from Dr. Charles F. Nicol in the second “Retrospective Review,” Dr. Nicol writes in reference to a “second letter” from Vanessa Ennis dated March 24, 2008 that “I see no reason to change any of my answers.” Multiple attempts to obtain an explanation from State Farm or from International Health Consultants have been fruitless. I have written by fax, email, called them, and sent US mail to them. No replies. I have tried since May 8, 2008 to get this data. It is clearly possible that Ms. Ennis attempted to coerce Dr. Nicol to alter and/or change my medical records and/or the report he constructed on my medical records and subsequent injuries. Since State Farm eventually paid out the medpay, it appears to me that her second letter was unsuccessfully coercive. No one at State Farm ever gave me copies of the medical/paper review. I never met Dr. Nicol. I obtained the review purely by accident from a medical doctor who had treated me extensively for injuries following the non at – fault accidents. This followed on the heels of Vanessa Ennis mailing over 28 pages of medical papers about me personally to my parents’ home at a separate address in the same town. She had also mailed records to a separate non-relative neighbor. It appears that she plays fast and loose with privacy issues and medical data. I have repeatedly asked for a copy of her second letter to Dr. Nicol. I have not received it. Her manager, Brett Suitor, will answer everything almost except the questions about the possible coercion and why Dr. Nicol would state “I have no reason to change any of my answers.” Please assist me. I have copies of all said documents. If indeed the letters and /or an investigation reveals that she did attempt some sense of bad faith coercion in any manner, then it makes all of her work on my claim suspect to me.

    Sop note: I have edited this comment to remove the contact information about the Farm’s adjusting team. We appreciate you commenting with us Mr Policyholder but lets leave their addy and phone number out of it. Thanks and welcome to slabbed.

  5. Policyholder I’d strongly suggest you contact a consumer oriented lawyer that specializezs in insurance litigation for a consultation. Such a consumer oriented lawyer should represent policyholders only.

    Also if the Farm mailed your medical records to unauthorized third parties I also suggest you contact the Georgia Insuarnce and Fire Safety Commissioner and/or the consumer protection division of the Georgia Attorney General.

    As your story indicates the Farm sometimes plays very dirty when adjusting claims.

    Good luck and keep us posted on your story.

    sop

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