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More Details On Our 4-Year Legal Battle With Wells Fargo Bank
invite response
2012 Jul 15, 9:32pm 26,254 views 64 comments
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taxee
2012 Jul 18, 11:20pm
That was my pension fund they lent to you that you didn't pay back. While I was working 70 hours a week driving a truck for 25 years, saving my pennies and living out of my camper, you were bidding up the price of homes to ridiculous levels with your stupid 'credit'. I'm still waiting for the correction to finish bringing prices down to where a worker can make a house payment. Hope you enjoyed your house.
Shaman
2012 Jul 18, 11:20pm
I agree that we need a whiner of the day/week award forum. It's just too entertaining to read self righteous people explaining that although they just bilked a bank for a crapload of money, they still deserve our sympathy because they believe themselves a victim!
Amazing! I want more.
zzyzzx
2012 Jul 18, 11:28pm
This is the phrase that is troublesome. It wasn't a worthless loan when he received $152,000. It only became a worthless loan when the value of his house collapsed. So why not give them their money back? What did you do with it? This is the one part of the story he leaves out.
Probably bling.
Randy H
2012 Jul 18, 11:47pm
That was my pension fund they lent to you that you didn't pay back.
No it wasn't. Very unlikely this borrower's debt was in the tranche that ended up in your pension fund. That is, unless your pension fund was being every bit as greedy and irresponsible as you imagine this borrower.
The saddest thing about this bubble, and something if you page all the way back to 2006 when many of us were discussing this long before it popped, is that it ends up with everyone turning on everyone else while the systemic problems that allowed and encouraged the bubble go untreated.
People "walking away" from debt actually has no bearing on the root causes of the issue. In fact, it probably helps in a very counter-intuitive way. But no one wants to hear that because it offends their sensibilities and they can't be bothered to think through things beyond the sound bites, so instead we paper it over and lay the groundwork for this to all happen again in a generation or two.
Here is what plenty of people in today's world need to read and learn, what the manipulators don't want you to read and learn, it's all right here:
http://www.cblpi.org/ftp/Econ/DeCoster_Stuff%20Does%20Not%20Equal%20Wealth.pdf
FortWayne
2012 Jul 19, 12:31am
I wouldn't blame Wells Fargo for this. How would you act if I borrowed $400,000 from you and refused to pay it back?
MisdemeanorRebel
2012 Jul 19, 1:05am
When a borrower makes a dumb decision and gets a loan they can't afford, it's their fault.
When a bank makes a dumb decision and writes a bad loan, it's still the borrower's fault, also. Huh?!
Banks didn't create the bubble by lending to everybody with a pulse and cause prices to skyrocket? And while they got bailed out by the Fed, that's okay, but we can't provide any relief for borrowers?
Gimme a break, Charlie Brown.
FortWayne
2012 Jul 19, 1:27am
Everyone isn't entitled to a bailout. One mistake does not mean we should forgive everyone else for it. Besides I was never for bank bail outs anyway.
You want to run a nation bankrupt and to fail? Bail everyone out and watch them repeat their mistakes as they will be conditioned to believe that mistakes will always lead to a bailout.
Eman
2012 Jul 19, 1:39am
When a borrower makes a dumb decision and gets a loan they can't afford, it's their fault.
When a bank makes a dumb decision and writes a bad loan, it's still the borrower's fault, also. Huh?!
Banks didn't create the bubble by lending to everybody with a pulse and cause prices to skyrocket? And while they got bailed out by the Fed, that's okay, but we can't provide any relief for borrowers?
Gimme a break, Charlie Brown.
Homo Economicus. A Legendary Creature, like Bigfoot, claimed to exist by Pseudoscientists.
Thank you very much. :)
Eman
2012 Jul 19, 1:42am
That was my pension fund they lent to you that you didn't pay back.
You should get a new pension fund then. It's not our problem that your pension is stupid in their investment choices. :)
So you own 5 properties, and in this thread you admit to trying to rip off $152,000 from Wells fargo in the form of an equity loan? Your legal costs posted here do not include the advise you needed because you are a complex property manager with complicated holdings and your desire to attempt this shenanigan.
I have money at Wells fargo and they are one of the most responsible banks with very safe reserves compared to the other banks. Responsible banks should be rewarded in a free market.
Wells fargo lawyers should force the sale of your other holdings to cover the $152,000 your are trying to skip out on.
If you do manage to walk away from your $152,000 equity loan then that will be converted to income that you will have to pay taxes on because it is a gain.
As I see it all 5 of your properties will be foreclosed on and put on the market thus driving down Bay area housing prices further for the new generation of buyers emerging.
I know a few investors that have gone through your exact same story. Those are the people you need to talk to. They are good at preserving any assets they have left.
Eman
2012 Jul 19, 2:05am
Wells fargo lawyers should force the sale of your other holdings to cover the $152,000 your are trying to skip out on.
Apparently his holdings don't have much equity. Otherwise, the settlement would have been higher. I still don't understand why someone would hang onto a property that's $400k underwatered. There must be more to the story. The gentleman just shared his experience with the readers. No need to scrutinize him. People live & learn.
It's just a business decision from all angles. You borrowed by the rules; you default by the rules; you buy back in 2 years by the rules.
Exactly. Walking away isn't the problem. The problem is the government bailing out the banks everytime they make bad loans.
One possible solution is to label the housing crash as a "Natural Disaster" and allow families with houses to apply for federal emergency disaster assistance. Treat it like any other Tornado, Hurricane, or Earth quake.
PockyClipsNow
2012 Jul 19, 3:37am
yes and stock market crash is natural disaster too
and bernie madoff + all other ponzi are natural disaster
there would be zero money left for actual disasters.
taxee
2012 Jul 19, 4:14am
When the shelves are empty because clever people spent all their time gaming the system instead of doing productive work I guess you can call it a natural disaster. Just blame it on their nature.
Homeboy
2012 Jul 19, 4:43am
So you own 5 properties, and in this thread you admit to trying to rip off $152,000 from Wells fargo in the form of an equity loan? Your legal costs posted here do not include the advise you needed because you are a complex property manager with complicated holdings and your desire to attempt this shenanigan.
Where did you get this info? I didn't see anything about them owning 5 properties.
joshuatrio
2012 Jul 19, 6:10am
When the shelves are empty because clever people spent all their time gaming the system instead of doing productive work I guess you can call it a natural disaster. Just blame it on their nature.
+1
I sounds like you Won when Wellsfargo agreed to give you a free $152,000 as long as you paid their $38,000 legal bill. You should have taken that sweet deal. What, you can't get $38,000? Hard to believe.
Randy H
2012 Jul 19, 9:46am
When the shelves are empty because clever people spent all their time gaming the system instead of doing productive work I guess you can call it a natural disaster. Just blame it on their nature.
The only cleverness I see here is your response. History has produced many incidents of "bare shelves", none of which were the direct result of too much game theory.
Eman
2012 Jul 19, 2:27pm
I think in his other posts on this forum
Wow. Disgusting.
Sorry, but this is not correct. Dhmartens must have misread some of the posts.
Randy H
2012 Jul 19, 10:27pm
Speaking of research:
Wells received $25bn in mandatory government bailout funds
Wells returned $27bn = $25bn + $2bn in interest to the govt
Given they didn't want or need the money, but nonetheless did what their country required of them during a crisis, it sure seems to me that the problem here isn't fractional reserve banking.
Though I will agree that actually doing some research is a good idea. Also good: heed your own advice.
MisdemeanorRebel
2012 Jul 20, 12:34am
Fractional reserve banking. Wells was leveraged 30-1 when the market crashed. They had 3 dollars of capital for every 100 dollars they lent out. They got bailed out. Why are so many of you freaking out about not paying them back. Wells and all the big banks are insolvent.
Yes, banks create money out of thin air. While many know this fact, it's an important point that people keep forgetting:
Banks loan out money that doesn't exist until the loan is written.
Homeboy
2012 Jul 20, 4:53am
Fractional reserve banking. Wells was leveraged 30-1 when the market crashed. They had 3 dollars of capital for every 100 dollars they lent out. They got bailed out. Why are so many of you freaking out about not paying them back. Wells and all the big banks are insolvent.
Let me explain this AGAIN. We don't give a rat's ass about Wells Fargo or any other bank. They can all rot in hell as far as I'm concerned. The issue is, when all the people who borrowed huge sums of money against the equity of their house and kept the money and never paid it back, they screwed US, their fellow taxpayers.
When people say the only possible course of action is a massive transfer of wealth from responsible, hard working citizens, to deadbeats who game the system, they have no idea what they're talking about. That is NOT the only course of action available to us.
In fact, that's exactly the sort of thinking that is bringing this country down.
The following would be my solution - lets say you put X as your downpayment back in the day. Lets assume that your home value went up. Lets call that new total equity value Y at the new specific point in time. Lets also say that the homeowner at that point took out a home equity loan in the amount greater than X. If they now default on the amount that exceeds the X (original downpayment money) after taking out the home equity loan, they should be sued for that amount and if unable to pay back, they should be imprisoned as if they committed a bank robbery for the same amount. Sounds fair?
Banks loan out money that doesn't exist until the loan is written.
That's not correct. Banks loans are funded by customer deposits. The Fed is the only one with the power to print. They do this during times of Quantitative Easing by unsterilized buying of Treasuries (and/or Asset Backed Securities).
Homeboy
2012 Jul 21, 7:46pm
Our current version of capitalism is very similar to monopoly. At the end of the game 5 people are broke and 1 person owns everything. What do you do if you want to keep playing? You start over......
How do you start over if one person has all the money? What do the other people play with?
Homeboy
2012 Jul 21, 7:54pm
We should have wiped them all out, written off all the bad loans, and used the 700 Billion dollar bailout to capitalize new banking institutions.
I like that, except "write off all the bad loans" sounds hopelessly naive. What is a "bad loan"? A loan where the borrower isn't making his payments? So every borrower who isn't making payments gets to keep all the money he borrowed and doesn't ever have to pay it back? How would you get ANYONE to ever make a payment on a loan again? Hmmm... keep making my loan payments or default and get to keep all the money. Tough choice, huh?
taxee
2012 Jul 22, 7:44pm
The difference between what we have now and a game of 'Monopoly' is that 99 players are doing what you would expect while one player can print as much money as he pleases. He can also change the rules at any time. And for the 99 the pain of loss is not a game.
freak80
2012 Jul 23, 2:13am
The difference between what we have now and a game of 'Monopoly' is that 99 players are doing what you would expect while one player can print as much money as he pleases. He can also change the rules at any time. And for the 99 the pain of loss is not a game.
A very good analogy, yes.
Homeboy
2012 Jul 23, 3:59am
Well because we are talking about mortgage loans a bad loan is a loan where the value of the underlying asset is less than the outstanding balance on the loan. You can have a good loan in real estate with the owner not being able to make the payment, if there is equity the owners sells and everyone is payed back. There is a good reason for people to pay back loans when the asset is worth more than the debt.
Oh, I see. So your "solution" is that everyone who is underwater (even by $1, I guess) automatically gets a free house, while everyone who is not underwater has to pay for theirs. Oh, and if you foolishly borrowed against the bubble "equity" of your house, and therefore OWE more than your house is worth, even though the house is worth more than you PAID for it, you get a free house.
That sucks.
What is hopelessly naive is to think that all these bad loans will ever be repaid in full.
I agree. Good thing I never said any such thing. Strawman fail!
When borrowers default, the house should go back to the lender and be sold to a deserving buyer. THAT's how you fix this mess.
It is funny to me that people get all upset when someone defaults on their mortgage. The terms of the mortgage contract dictate what happens if they default, the bank gets to take back the property.
I don't get upset when someone defaults, I get upset when naive people suggest that anyone who defaults should get a free house.
The other hilarious part of the situation that we are all in, is that banks made terrible subprime loans to people they knew would never pay them back on the assumption that they could take the property back in the end and make even more money. The lending practices of the banks caused the entire bubble and the entire crisis.
Yes, we should have let those banks go under rather than using trillions of taxpayer dollars to bail them out. You're preaching to the choir, dude.
Homeboy
2012 Jul 23, 4:06am
Just like in monopoly they give back all their "property" and money and you start a new game.....
Except that you want everyone to get to keep their property. Can't have it both ways.
Homeboy
2012 Jul 23, 4:07am
The difference between what we have now and a game of 'Monopoly' is that 99 players are doing what you would expect while one player can print as much money as he pleases. He can also change the rules at any time. And for the 99 the pain of loss is not a game.
Plus he's reaching over and taking YOUR money when you're not looking.
Homeboy
2012 Jul 23, 4:12am
We should have paid off all the existing home loans (instead of giving the banks billions or trillions) but they still would have lost money because of all their bets. But at least we could have started new banks and renegotiated the home loans that got paid off - and we still wouldn't have lost as much money.
But that's just rewarding the irresponsible. A better idea would have been to give the trillions to people who have never owned a home and let them buy one. The people who bought more house than they could afford would have to give them back. THEY can rent, and former renters can all own houses. A great lesson in responsible living.
freak80
2012 Jul 23, 5:04am
Yes, we should have let those banks go under rather than using trillions of taxpayer dollars to bail them out. You're preaching to the choir, dude.
Hey now, this is America. The land of crony capitalism. It's what America was founded on.
Homeboy
2012 Jul 23, 2:20pm
I wasn't advocating free homes for anyone.
Then please explain what you meant by "We could have paid off all the existing loans". If the government pays off your loan, doesn't that mean you get a house without paying for it? Wouldn't that be a free home?
All I'm saying is that you can't blame the people who took out the loans because the system should have prevented that from happening.
I can blame both. Banks should not have been allowed to overleverage themselves. But that doesn't absolve you of responsibility if you knowingly borrowed more money than you could afford to pay back, and LOTS of people did just that. Why are you defending irresponsible behavior? YOU are responsible for your personal finances. The bank is not your mommy.
Homeboy
2012 Jul 23, 2:21pm
Hey now, this is America. The land of crony capitalism. It's what America was founded on.
Didn't used to be this bad.
freak80
2012 Jul 23, 4:05pm
Didn't used to be this bad.
When?
Perhaps in the 50's and 60's before the New Deal Coalition was destroyed?
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Below you will find more details on our horrific battle with Wells Fargo Bank. Many readers felt that we should have walked away or declared bankruptcy. If you are dead broke and lawsuit proof this is a great idea. If you have income and assets, Wells Fargo will come after you and cost you tens of thousands of dollars in legal fees and unimaginable heartache.
Yesterday Elena and I came back from a delightful morning at Stanford University and San Mateo. Elena took the mail up to the house and put it on the table. Thee was one innocuous letter from the San Mateo County Clerk's Office. I assumed it was just a notice on the change of our property taxes due to the recent passage of a parcel tax for the Jefferson Union High School.
I opened the letter and it was a legal paradox. It was in complex legal language that I had to struggle to understand despite the fact that I had attended law school. I figured out that it was the release of lien on the second lien that had haunted our house since 2007. It was anti climactic. I was in shock to finally see this document after a four year legal battle. Elena could not read the complex legal language. I had to translate it for her despite the fact that she is a medical doctor.
All of this drama began in April of 2007 when we took out a second mortgage on our house during the wild housing bubble. From the start we had trouble with Wells Fargo Bank. The monthly payment was an astronomical $2,500 US per month. When the housing bubble burst our house dropped in value from $870,000 to about $400,000. I also left my corporate job to form my own resources business. I picked up a client in Colombia. I was part of a team developing a new gold mine. It looked like I had a $250,000 fee coming in. Sadly we never got paid for all of our work. I found myself over 60 years of age and unemployed.
I contacted Wells Fargo Bank and asked for a loan modification on the second lien. They were nice to me at first. They reduced our payments from $2,500 per month to $800 per month. We paid this payment for 18 months. We then were served with a demand to increase the payments back to $2,500 per month. We declined and stopped paying on what we considered to be a worthless loan.
We continued to negotiate with Wells Fargo Bank. I even went to a meeting with their loan officers in Oakland. Nothing seem to work.
I met with a very good real estate lawyer in San Bruno. He pointed out that even if we walked away from the house and did a strategic default, Wells Fargo could sue us for the $152,000 balance of the loan because the loan proceeds were not purchase money. We were looking at the prospect of Elena's wages being garnished for years to pay for a worthless loan.
In April of 2010 I filed by Chapter 13 bankruptcy reorganization. I started with one team of lawyers but soon realized that the case was very complicated. I took the case to one of the best bankruptcy lawyers in the US; Cathy Moran. She took the case. She looked at the Wells Fargo second lien. It was in Elena;s name and Elena was not on the bankruptcy. She said that California was a community property state and I could put the loan on my bankruptcy petition despite the fact that my name was not on the loan.
When Wells Fargo heard about this bankruptcy filing. They hired a top-notch lawyer to fight us. This man was so well respected in bankruptcy circles that the US Justice Department had suggested that the Russian government use his services to help them develop a comprehensive new bankruptcy law.
Cathy Moran did a great job of fighting this matter through one year in court. The bankruptcy judge agreed that our law was correct. He had a personal objection to the fact that Elena was not on the bankruptcy petition. He felt that Elena was getting the full benefits of bankruptcy without the penalties of bankruptcy. Wells Fargo was taken off the bankruptcy petition. We eventually exited bankruptcy and the legal bill was over $20,000. I suspect that Wells Fargo had a legal bill just as big.
We tried to negotiate with Wells Fargo Bank. They demanded $38,000 to settle the loan. We did not have that kind of money. A collection agency was brought in. We were deluged with phone calls and letters for 18 months. We were expecting a lawsuit and another $20,000 legal bill. If Wells Fargo had sues us they would have had a $20,000 legal bill also as the litigation drug on for several years. If the case had gone to the appeals courts. Elena and I could have seen a total legal bill of $35,000 as would have Wells Fargo.
One day I called the collection agency and got a really nice lady named Mitzi on the phone. She said that she wanted to work with Wells Fargo bank to get the settlement figure down to $25,000.
I had already worked with one of the best debt negotiation law firms in the US; The Comfort Law Firm of San Mateo, California. I called them and had a meeting with Alan Sherman who is one of the best negotiators on planet Earth. I paid them a $5,000 retainer. Alan and Mike went right to work. They got the collection agency to agree to take $20,000. Alan also got Wells Fargo bank to approve this settlement figure.
Over the next month we paid $20,000 to the collection agency. It took all of our liquid savings and other money that we could put together. We lived an austere life while paying this money. Ironically Wells Fargo got $10,000 of the money and the collection agency collected a juicy $10,000 fee for doing virtually nothing.
I was worried that the collection agency would "pocket" the whole $20,000 and give nothing to Wells Fargo. We would stioll be stuck with a $152,000 bill.
A few weeks later a letter arrived from Wells Fargo Bank. It informed us that they had received the settlement payment. We were promised a release of lien and good report to the credit bureaus.
It was a big relief to see the release of lien yesterday.
We still have to hire an accountant at year end to prove the IRS with data to prove that Elena is insolvent so she will not have to pay up to $40,000 in income taxes on thew a form 1099(c) that Wells Fargo bank will send her early next year for $132,000. We have enough debt to prove that the satisfaction of the IRS that we have a negative net worth.
This awful legal battle cost us $25,000 in legal fees and another $20,000 to Wells Fargo. Thanks to what I learned from Gretchen Morgenstern at The New York Times, we will be able to legally void that form 1099(c) for $132,000 in income.
My dear readers Wells Fargo Bank did not lose all that money. They probably had our loan in some mortgage-backed securities that were sold, for example, to some teacher's retirement fund in New Zealand. These hard-working teachers were the ones who suffered the big loss.
Wells Fargo is the most ruthless bank in the world. They play "hard ball" and they will make your life hell on earth. This is a soul-destroying experience.
#housing