Though I can't speak for all financial institutions and all states, I can confirm that here in California, Wells Fargo IS PAYING the homeowner's insurance on a property which I am the executor, and have stopped making payments back in March. I confirmed this through "Triple A" (AAA) Insurance Company. I'm not sure about the property taxes, but I do know that I'm not paying them, so it is possible that through an impound account or through direct deposit, Wells Fargo is paying that also. I hope this helps.
Also, for what it's worth, I have been in the courtroom during one "predatory lending" case and one "improper use of funds by an investment firm" case, and you may be pleased to know that in both cases, the judge immediately ruled in favor of the borrower/customer, and basically told the "institutional attorneys" that the clients that "they" represented acted inappropriately and "not in the interest of their customers" (paraphrased). These were "arbitration" cases, in other words, no jury.
Come to think of it, there were articles that talked about how the banks that put people through foreclosure hadn't even transfered the names on the titles just so they wouldn't be stuck with the tax bill. So if they haven't transfered the names, can they really get insurance on a property in someone elses name? If they've foreclosed, there is no longer a lien, so without a name change, can they qualify to collect? Interesting to say the least.
I have 8-10 friends who have been going through the foreclosure process in florida for 2-2 1/2 years. They are hiding the truth. The bank is even paying there taxes because atleast they are taking care of the property until they can foreclose.. WE ARE SCREWED!!