Wells Fargo Servicer-Driven Foreclosure: Is Stumpfs Company Vicious and Incompetent or Vicious and Greedy?
By Abigail Caplovitz Field
Reality Check: Confronting the Naked Emperors
Reposted from http://abigailcfield.com/?p=992
Well DOERs, John Stumpf, CEO of Wells Fargo, is a schmuck.
CEO Stumpf knew (because DOERs told him) that the only reason grandma Patricia Martin faced foreclosure was because a Wells Fargo employee–Stumpf’s employee–lied to her daughter about late fees, and then rejected her for the loan modification it told her to apply for. Why did Wells reject Grandma Martin’s modification application? Well, given the facts, I see two possibilities. Stumpf’s company is incredibly incompetent or deadly sin-level greedy. Either way Stumpf’s Wells Fargo is vicious.
Vicious, Yes. Also Incompetent and/or Greedy.
Vicious because Wells Fargo is kicking Grandma and her family to the curb when the Martin family has acted properly and in good faith. As an added bonus, Stumpf’s employees were abusive and cruel. (See Mandelman’s original DOER alert and the update for the background.)
So besides vicious, is Wells incompetent or deadly-sin level greedy? The answer rests on whether Wells’s math errors were inadvertent (incompetent) or deliberate (greedy.) See, the key reason the mod failed is that Wells crunched the numbers using an inflated value for the house: $370k, instead of the $300k it was actually worth. Wells acknowledged it used the wrong number, and re-ran the numbers. But instead of using $300k the second time, they again used $370k. The inflated value meant taking Grandma Martin’s home would be worth more than modifying her loan. Garbage in, garbage out. But for doing the math wrong, the Martin mod would have been approved and the foreclosure averted.
If repeating the math error was an accident, then John Stumpf’s Wells Fargo is incompetent. True, other evidence suggests Wells is fundamentally incompetent; how else to explain what happened to the Bowers family, as recently reported by Reuters? But if failing Grandma Martin with bad math twice was deliberate, we’re talking deadly-sin level greedy because it means Wells didn’t want her money, it wanted her house. And taking her house hurts everyone except Wells. A home in foreclosure can be a profit center for a servicer like Wells.
Everyone Loses With a Foreclosure, Except Servicers of MBS
See, taking the house hurts the Martin family, because they lose their home of 44 years. Taking their home hurts the Martin family’s neighbors and community by lowering property values and damaging the tax base. (Note: Las Vegas and other jurisdictions are trying to limit the damage by forcing bankers to take care of the properties they evict people from.) Finally taking the home also hurts investors in the mortgage backed security Grandma Martin’s mortgage is in, because right now homes are lousy collateral.
Good collateral is worth more than the loan made against it, so you can take the collateral and be comfortable that you’ll get all your money back. Bad collateral is a house that will fetch far less than the mortgage balance, a price that will be largely captured by fees imposed by the mortgage backed security’s servicer. And that’s the key: houses in foreclosure are an amazing opportunity for bankers to leech fees.
The servicers’ brazenness can’t be overstated. Check out what fraudclosure fighter and activist Lisa Epstein documented: the servicer is charging investors in a mortgage backed security fees for loans that don’t exist any more; they’ve been paid off or the houses foreclosed and sold to third parties:
“Some “non-existent” loan examples from the trust
Roman Pino loan #130133456 – $162,400 – (July 2011 satisfaction – still on the books in Jan 2012 trust report in “foreclosure” status) [monthly servicing fee $50.73]
Samantha Woodruff loan #130521936 – $171,940 – (Sept 2011 deed from trust REO to new buyer – still on the books in Jan 2012 trust report in “REO” status) [monthly servicing fee $33.70]
Robert Rodriguez loan #130450231 – $176,542 – (Sept 2011 short sale deed & Nov 2011 satisfaction – still on the books in Jan 2012 trust report in “REO” status) [monthly servicing fee $181.69]
Elsa Castillo Rivas loan #130445815 – $375,000 – (July 2011 short sale deed) – remained on books through Dec 2011 in “REO” status), finally reported as “liquidated” in Jan 2012 report [monthly servicing fee for non-existent mortgage $328.04]
And here’s the kicker. Epstein says:
“This is just a small example of what we are uncovering. If we learned anything from the robosigning scandal, if there are more than two “irregularities,” there are thousands.”
How could servicers be so reckless as to charge investors fees for loans the public records show haven’t existed for months? Well, they must be counting on investors’ inability to get their acts together and take collective action. I wouldn’t take that bet, personally.
Admittedly, the example above involves Bank of America (BofA) as servicer, but there’s no reason to think BofA is alone in this theft. Still, there’s other ways to siphon a gusher of fees en route to a REO sale. And apparently Wells is so bad about charging too many and excessive fees, they’ve been sued (along with JPMorgan Chase) over their practices. These fees come first from the homeowner, but when there’s not enough equity to cover them and the mortgage at foreclosure sale, they also come from investors. And these days, it seems there’s never enough equity to cover the mortgage, much less the fees. So Wells is systematically ripping off homeowners and investors.
Greed or incompetence–incompetence or greed? Which was at work in Grandma Martin’s case? Well, consider what Stumpf’s foreclosure trustee told Martin on the phone: “Wells isn’t offering you a repayment option, they don’t want your money, they want your property and that’s all there is to it.”
The Wells Fargo Lie that Got Grandma Martin’s Foreclosure Started
Before yesterday’s scheduled court proceeding to evict Grandma Martin and her family, Stumpf knew that the Martin foreclosure grew from a lie his employee told. Stumpf knew, because DOERs told him. Just to recap, though, here’s what happened:
Grandma Martin was late her August and September payments, and in the hospital because of back problems (back problems that followed a stroke and heart attack. Seriously.) Rather than become three months late and go into default, Grandma Martin gave her daughter a check for the August and September payments on September 26th and sent her to Wells to pay it. Wells told Martin’s daughter that it was charging two late fees, for about $160, but then added, hey, don’t worry, we’ll accept your check, apply the payment to both months in full, and then next time you can make up the late fees. At that moment, Martin’s daughter probably thought: Great! Wells is being stand up about this, not sending me back to Grandma Martin’s hospital bed to get another check for a lousy $160; I mean, the two months we’re paying are over $3200.
But if only she had rushed back to the hospital! Then Grandma Martin never would’ve been foreclosed. See, when Stumpf’s employee told Martin’s daughter it wouldn’t take the late fee out of the check, Stumpf’s employee lied. Because Wells lied and deducted its late fees, Wells treated Grandma Martin as if she was $160 short on a $1600 payment, and labeled her one month behind. Not that Martin’s daughter had a clue about the lie; Wells cashed the check after all.
Stumpf the Schmuck knew, because DOERs told him, that the Grandma Martin’s troubles didn’t end with her series of catastrophic health issues. The heating system in her home of 44 years finally gave out and she had to invest several thousand dollars in fixing it. Stumpf knew the furnace is why Grandma Martin missed the October payment, why she also went late in November. In mid-November the Martins called Wells to say they would shortly make both the October and November payments, but were told to instead do a loan modification, that they qualified for one. Shortly after that, they got a letter saying they were in default and had to pay three months worth by November 30 to avoid being foreclosed.
That letter was how Grandma Martin discovered that Wells had lied to her daughter. So far as Grandma Martin and her daughter knew, they were only two months behind, and they were offering to bring the loan current before December. But rather than take the money Wells channeled her into a really abusive mod process, and we know how that turned out. (Again, if you haven’t read it yet, check out Mandelman’s original DOER alert.)
Again, Stumpf knew all this because DOERs told him. Stumpf knew that his company eventually did foreclose on Patricia Martin, California style. And Stumpf knew that earlier this week, on Tuesday February 21st his foreclosure attorneys were trying to get her evicted from the house she’d bought with her late husband 44 years earlier. So what did Stumpf do? Nothing. He let his foreclosure attorneys put on a grotesque display of callousness.
Wells Fargo’s Word Is No Good Even If In Writing
At the February 21st eviction hearing Stumpf’s attorneys made the following argument:
look judge, it doesn’t matter if Stumpf’s employee lied and said they wouldn’t deduct the late fees, thereby depriving Grandma Martin’s daughter from getting the extra $160 to make good. It doesn’t matter, your honor, because she didn’t put that promise in writing, and the “Statute of Frauds” requires that kind of promise to be in writing. So even if Stumpf’s employee made that promise, Wells Fargo can’t be bound by it.
The layers of offensiveness in that argument are as thick as the sedimentary deposits in the Grand Canyon, but are made up of self-righteous bs instead of silt and sand. For starters, California’s Statute of Frauds doesn’t seem to apply. I dare you to find a way to interpret Section 1624 or 1624.5 to make it apply to Stumpf’s employee saying don’t worry, we won’t deduct the late fees.
At a slightly deeper layer, the idea that Wells’s word can’t be trusted because it’s not in writing is offensive because Wells has executed all kinds of writings can’t be trusted. For example, Wells files documents that say: hey, look, we know we said in earlier filings that this mortgage was paid off, but psyche! it wasn’t. (Examples here and here; to understand why these matter so much, consider the Reuters story I mentioned earlier.)
Some Wells documents are just silly, like Wells’s famous robosigner, John Kennerty, executing and filing this assignment of mortgage in May, 2010 when the loan it’s talking about was foreclosed in December 2009 and the underlying home sold to a third party buyer in March, 2010. Some Wells documents are less ridiculous, more problematic. Consider this bankruptcy case; Wells got in hot water for magical endorsements. So the premise that if only Wells’s employee’s promise had been in writing, it would’ve been good is nonsense.
The deepest layer of offensiveness, however, in the claim that the promise didn’t count because it was barred by the Statute of Frauds is the history of the Statute of Frauds itself. See, a few hundred years ago, powerful people routinely used perjured testimony to steal people’s houses. The Statute of Frauds was the response. In an era where servicers including Wells Fargo routinely file false and even perjured documents in land records and courts as part of their standard operating procedure when repossessing someone’s home, their attorney’s invocation of the Statute of Frauds is, well, I just don’t have the right word for that.
Grandma Martin Hasn’t Given Up, And We Can’t Either
Grandma Martin’s attorney persuaded the judge that on these facts, Wells should be blocked from evicting the Martin family and the judge issued a temporary restraining order. That means we still have time to persuade John Stumpf that he’s doing a lousy job of running his company and that he really needs to step in, reverse the foreclosure, wipe out nonsense fees that have accumulated along the way, and finalize the loan modification. John Stumpf can do all those things because hey, he’s in charge, and besides, it’s easy; Wells owns the house as of now. Heck, BofA bought someone’s house back after it discovered an equally egregious backstory.
So DOERS, Please send an email to Chairman of the Board, President, CEO: John.G.Stumpf@wellsfargo.com; (415) 396-7018.
Maybe Stumpf will take the chance to redeem himself.
p.s. I don’t just use Wells Fargo and John Stumpf interchangeably because he’s Chairman and CEO, though that is cause enough. I do it because he’s been in charge a long time, as I noted in this post: John Stumpf has 29 years of experience at the company, taking over as President in 2005 and CEO 2007, and Chairman in 2010.