This is not a joke.
Various Philadelphia media outlets have told the tale of one Patrick Rogers, who was increasingly unhappy over his inability to get satisfaction from Wells Fargo over fees related to his mortgage, and initiated foreclosure proceedings as a way to get their attention.
Now how exactly could he do that? And is his action a possible template for other frustrated homeowners?
Rogers had a legitimate beef. The California bank had doubled his insurance costs, putting him in a policy that had him carrying $1 million of insurance on a property he bought for $180,000 in 2002. Note that this looks an awful lot like a forced place insurance scam; servicers find creative ways to overcharge for insurance and then get kickbacks.
When the bank refused to answer questions about the charges, including ones sent in writing, Rogers looked into ways to force the bank to respond. As the Consumerist explains:
Patrick boned up and learned about a law called the Real Estate Settlement Procedures Act (RESPA). The law was enacted to safeguard homebuyers from anti-competitive and collusive behavior among the companies and agents involved with buying and selling real estate. One of the protections involves the “Qualified Written Request,” or QWR.
The Qualified Written Request is a specific kind of letter that you can send to your mortgage servicer when you believe there is an error on your mortgage account. You have to make sure to follow the rules for formatting it, but the servicer is bound by federal law to respond within a certain period of time. If they don’t, you can go after them for actual damages, costs and attorneys fees, plus $1000 of additional damages if there is a pattern of noncompliance.
“Do your research,” says Patrick. When drafting it, besides getting tips on writing one from various consumer sites, he also went to banking sites and saw how bankers were talking about ways they had rejected various QWRs. He made sure to craft his so it couldn’t get disqualified. “Use the internet as your law library,” says Patrick. With a little Googling, he was quickly about to find official resources and templates that guided him, step by step.
More than any site, blog or message board, “Looking at the actual law was a big help,” he said. A lot of websites offered bits and pieces, or their (mis)-interpretation, of the law. The best resources came from going to the official US Government pages and looking at the actual statutes in full. “It took a little bit of time to sit and process the legalese,” but it was worth it.Within 20 days, the company must say they got the QWR, and they have 60 to take action on it. That action must be to either correct the problem or to respond back with why they think they’re right. They must also give a name and phone number for the borrower to contact with questions about their account.
Wells Fargo did none of these, says Patrick. So he moved on to the next step provided by RESPA: statutory damages, aka, cash money.
Even though legal fees would be covered under RESPA, the amount at issue was too little to interest attorneys, so Rogers filed a claim against Wells in small claims court. Most cases in small claims courts are pro se, meaning the parties to the suit argue their own cases. No one from Wells appeared, so Rogers got a default judgment for $1,173. Even though Wells did send payment, they still refused to respond to his letters or reduce his premiums, as the statute required. Again per Consumerist:
So he filed for a sheriff’s levy. This directs the sheriff to seize and sell the debtor’s property to pay up. In this case, it was the local branch office of Wells Fargo mortgage, the ones who had been ignoring him all these years.
To get the levy, he presented the court clerk with his default judgment and got the Writ of Execution and the Instructions for Levy which he delivered to the sheriff’s office. He paid them a $50 deposit to cover their administrative costs. A local sheriff then went into the Wells Fargo branch office and took an inventory and posted notice that nothing could be removed. The court also gave him several posters which he was expected to xerox and post around town.
The article is a bit unclear, so I assume the default judgment included the requirement that Wells respond to the information request and lower the insurance premium.
The two parties appear finally to be working towards a resolution. And notice how he was shrewd enough to invest the time to draft a proper QWR; most people would have grabbed the first template they found on line and used that (and given that bank sites discuss how to reject QWRs, one has to wonder if at least some of these deficient models are bank plants).
So this route isn’t for everyone. But could it be? For instance, mortgage counselors work regularly with borrowers under stress. It would not take much effort for a the legal aid program of a local law school to come up with proper models for effective letters under RESPA. The school or the mortgage counselors could also give advice on follow-up steps on the course of action in the likely event that the bank did not reply.
If some groups got together to make these letters and strategies more accessible to ordinary borrowers, they could be used to enforce the law’s intent, namely, that banks treat borrowers fairly.
Now this may seem funny, but it is actually pathetic that someone had to go to this length for a bank to straighten out an “error” that may in fact be an institutionalized abuse.
In Part I of this series we discussed the media's failure to accurately report the scope and nature of the banker crime wave around foreclosure fraud, and talked about the confusion over reports that the Administration has proposed a framework for settling the fifty-state lawsuit against the banks. (Hmm ... wonder why there wasn't a Federal lawsuit, too?)
Is there really an Administration proposal for a deal? Given the number of reports and the absence of denials from the White House, the answer appears to be ... sort of. It seems clear that the Administration's proposing to create a $20 billion fund at the banks' expense which would be used to help underwater homeowners, and that the banks would administer this fund themselves (we'll respond to the proposal outline in Part III of this series). But even that's not 100% certain, since reports suggest that there's still infighting among government agencies.
Reuters reports that the Consumer Financial Protection Bureau (CFPB) and Federal Deposit Insurance Corporation (FDIC) folks are pushing for a larger settlement, but that the Office of Comptroller of the Currency (OCC) thinks the proposed settlement is already too big. All of this alphabet soup is beginning to spell out a slang expression that describes the government's handling of this situation with pinpoint accuracy. That expression begins with "cluster" and ends with the word Melissa Leo introduced to the Academy Awards last Sunday night.
The virtual ink was barely dry on the initial reports of an Administration proposal when Reuters reported that "regulators' efforts to settle with banks over improper mortgage foreclosures are being hampered by disagreements among the groups involved over the size and shape of an accord." Other stories then elaborated on the squabbles among Federal agencies over the scope and nature of the proposed settlement. It seems as if everybody in the Federal government is running to the press so they can put their own spin on a proposed deal.
It looks like we're observing a serious vacuum in leadership during a time of crisis. This vacuum, together with the confusion that's been created in the press as everybody pushed their own agenda, has left the public becalmed in fog-shrouded waters somewhere between Conflicting Viewpoints, Absolute Bewilderment, and WTF.
(Hey, you know what would be great? It would be great if all of these Federal agencies reported to a single person - and that person was empowered to make an executive decision on behalf of the entire executive branch of government. You could call that person the "Chief Executive," or ... but I digress.)
Despite all the confusion, the outlines of the Administration's proposal seem to be coalescing around three main provisions: Banks would have to write down the principal on underwater mortgages with $20 billion of their own money (investors in mortgage-backed securities and other instruments would not be held responsible), and they would implement their own mortgage modification programs. No government money would be used to reduce principal.
Any proposal from the Federal government would have to be accepted by the states before being presented to the banks. Based on what we've learned so far, does this proposal provide the right framework for a comprehensive settlement? We'll save our conclusion for the third and final installment of this series, but here's a sneak preview:
No.
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