Archive for the ‘ Loan Modification ’ Category

Wells Fargo: Worst Bank Ever? Part IV…

I’m cheered to see that others out there share my opinion of Wells Fargo Bank. For my prior screeds against this bank, see here, here, and here.  My rants against Wells Fargo may soon have as many volumes as the Harry Potter books.

Seriously, I worried that my dislike of the bank might be overblown but obviously not when ever-more-harrowing details of their practices keep coming to light, such as those recently provided by The Atlantic and Rolling Stone.

We should all be riding on the Wells Fargo stagecoach: to get as far away from that bank, as fast as possible.

I Don’t Do Magic

I don’t do magic (despite owning four bunnies that I could pull out of a hat).

I say this because I occasionally have a client who has heard of a legal maneuver to solve her problem, yet is too good to be true.  In a particular case, my client faces a foreclosure on her home after her bankruptcy is over.  She has no income, and therefore cannot modify her mortgage.  She has lived there rent-free and mortgage-free for three years.

She found a fellow named Jean Keating, who purports to have 50 years of experience at defeating foreclosures.  I read his published materials (and you can too herehere and here). My opinion: this is total gibberish.

I have no problem with, and indeed welcome, clients getting a second opinion.  That is, so long as the other opinion comes from a licensed authority.  Or someone sane.

Mr. Keating suggests that I present a “letter rogatory” to my client’s bankruptcy court.  A letter rogatory is an ancient procedure whereby one court asks a foreign court to subpoena someone in, say, Argentina.  It doesn’t do anything in a local bankruptcy court.  The foreclosure will go on and I can’t stop it.

Keating’s arguments sound very much like the claptrap I occasionally heard at the IRS – such as characters who believed a fringe on a flag meant the court was illegitimate, or that Ohio wasn’t technically a state when the 16th amendment was passed, or that the government has no authority and therefore, the government may not tax income.

Unscrupulous people sell foolish hope to desperate folks.  I hate delivering harsh reality to my clients, but it is part of what I do.  I could charge my client and try to follow Keating’s procedures, but I know that it won’t save her home.  Failure here might hurt my reputation.  More importantly, it would hurt my character: I cannot, in good conscience, take money to do something that I know won’t work.  In short, I am merely an attorney, not a magician.

Wells Fargo: Worst Bank EVER, Part III

I took a client through a chapter 7, and got her a discharge.  She and I were done, and she had no more personal debt. Then she sought a loan modification with Wells Fargo.

I knew that she was doing a loan modification because Wells Fargo sent me dozens of letters saying that this is how her loan mod is going, that they are communicating with me because I am the attorney of record, and please forward the correspondence to the client.  I wrote back five times saying, in effect, talk to her directly because I don’t represent her in the loan modification, and yes, I’m forwarding your correspondence to her anyway.

Then they sent a letter saying that because they were trying to get in touch with me and hadn’t heard from me, that they were shutting down the loan mod.  I went ballistic, and let the bank know how upset I was.  See Exhibit A. I also called the Wells Fargo functionary writing to me, left outraged messages, and copied the bank president.

Three more letters arrived in the next week: “please forward to your client, as we can’t talk with them directly.”  I had the brainstorm of sending them an invoice for my time.  See Exhibit B.

This got Wells Fargo’s attention.  Someone called me to tell me that the loan modification was going just fine with my former clients, it wasn’t being dropped, and that the bank was indeed dealing with them directly.  “Ignore our letters.”  They just don’t have the capability of turning off the automatic stream of letters.

They also said that they had gotten my invoice, were considering it, and would give me an answer.

The bank’s ultimate answer floored me. See Exhibit C and the check.

I’ve worked in big organizations before, and there is a lot of waste and mismanagement. This one gives me little confidence in the way that Wells Fargo Bank is being run, even if it did help my bottom line.

Why I try not to do loan modifications

The following commentary is from Hale Antico, a local bankruptcy attorney colleague:

Bank of America’s mortgage servicing unit systematically lied to homeowners, fraudulently denied loan modifications, and paid their staff bonuses for deliberately pushing people into foreclosure: Yes, these allegations were suspected by any homeowner who ever had to deal with the bank to try to get a loan modification – but now they come from six former employees and one contractor, whose sworn statements were added last week to a civil lawsuit filed in federal court in Massachusetts.

“Bank of America’s practice is to string homeowners along with no apparent intention of providing the permanent loan modifications it promises,” said Erika Brown, one of the former employees. The damning evidence would spur a series of criminal investigations of BofA executives, if we still had a rule of law in this country for Wall Street banks.

The government’s Home Affordable Modification Program (HAMP), which gave banks cash incentives to modify loans under certain standards, was supposed to streamline the process and help up to 4 million struggling homeowners (to date, active permanent modifications number about 870,000). In reality, Bank of America used it as a tool, say these former employees, to squeeze as much money as possible out of struggling borrowers before eventually foreclosing on them. Borrowers were supposed to make three trial payments before the loan modification became permanent; in actuality, many borrowers would make payments for a year or more, only to find themselves rejected for a permanent modification, and then owing the difference between the trial modification and their original payment. Former Treasury Secretary Timothy Geithner famously described HAMP as a means to “foam the runway” for the banks, spreading out foreclosures so banks could more readily absorb them.

Keeping your house in bankruptcy

I mainly practice in bankruptcy law. I hope to start a blog that includes articles about issues in bankruptcy law and cases I’ve had. I start with a simple question that I get a lot from potential clients: Can I keep my house in bankruptcy?

My very-lawyerly answer? “It depends.” Usually the debtor can keep the house, but he or she has to keep paying the mortgage. The mortgage is not wiped out in bankruptcy. However, if you are late in your payments, the house is being foreclosed on, and you believe that you will lose the house anyway, then bankruptcy is a good option. The lender cannot foreclose on a house unless the bankruptcy court gives approval; this takes several months, during which you can stay in the house. And when the house is finally foreclosed on, there is usually a cancelation of debt, which becomes income to the debtor. When the foreclosure occurs after bankruptcy, that income is not taxable. If the house is foreclosed on outside of bankruptcy, that income may be taxed (if it’s your primary residence, it won’t be, but not every house foreclosure is for a primary residence).

But let’s say that you’re late on mortgage and want to keep the house: is bankruptcy a good idea?  Usually, yes. Under a chapter 13 reorganization plan you can take the arrearages (the amount of the mortgage that is past due) and pay these arrearages out over the next 5 years. You still have to make the regular mortgage payments too, so you’re making a larger monthly payment than you normally would, but at the end of the five years you’re up to date on your mortgage and you’re discharged of other debts. So long as the payments are current, the lender cannot foreclose during those five years.

So yes, debtors can keep their homes in bankruptcy, and it is a good option to those who are late on a mortgage.