Please
let this be just the first of the multitude of righting-wrongs that need to
take place throughout the nation. These greedy banks. It’s such a shame that
it’s taken this long to get a decision like this, and I know that there are
hundreds of thousands of homeowners who need the help. And I know that there
are hundreds of thousands of renters of foreclose properties (with the banks or
their partners acting as landlords) that need significant help to fight back
against the lazy, inadequate, and many times non-existent services of their
landlords.
Despite widespread reports that the
banks and other companies that service home loans engaged in a range of
misconduct -- from ordering unnecessary property inspections to misapplying
payments in a way that can lead to wrongful foreclosure -- few judges have had
the time, ability or inclination to do the kind of forensic analysis necessary
to uncover wrongdoing in individual cases. For a non-accountant, reading a loan
history is like interpreting hieroglyphics without a Rosetta Stone, and banks
are often reluctant to turn them over in the first place.
The exceptions have tended to come in
federal bankruptcy courts, where justices typically have more time to dig into
loan accounts, and are much more likely to have the financial expertise
necessary to do so. In an earlier interview, Magner said that she analyzed the
loan files of more than 20 borrowers in her court and found mistakes in every
instance.
"These are loans of working-class
people who bought homes they could afford and whose loans were not administered
correctly from an accounting perspective," she said. "I think that
these types of problems occur in almost every [defaulted] loan in the
country."
The current case involves Michael Jones
of New Orleans. In a 2007 decision, Magner ruled that Wells Fargo improperly
charged Jones more than $24,000 in fees, owing to a fundamental problem in the
automated methodology the bank used to account for his loan payments.
After Jones fell into default, Magner
ruled, the bank improperly applied his mortgage payments to interest and fees
that had accrued instead of to principal, as required by his servicing
contract. This triggered a waterfall of additional fees and interest that
consumer lawyers call "rolling default." Later, after Jones applied
for bankruptcy, the bank continued to misapply payments, according to Magner's
opinion.
In the most recent opinion, Magner
describes Wells Fargo's litigation tactics, which involved filing dozens of
briefs, motions and other filings that slowed down the proceedings to a snail's
pace, as "particularly vexing." The tactics suggest that any other
borrower who might wish to contest a fee or charge would find a legal challenge
to the bank simply too burdensome.
And yet, Magner writes, it is only
through litigation that the abuses can be uncovered. Calling Wells Fargo's
conduct "clandestine," Magner wrote that the bank refused to
communicate with Jones even as it was misdirecting payments for improper
purposes.
"Only through litigation was this
practice discovered," Magner writes. "Wells Fargo admitted to the
same practices for all other loans in bankruptcy or default. As a result, it is
unlikely that most debtors will be able to discern problems with their accounts
without extensive discovery."
Magner wrote that the bank still
refuses to come clean with homeowners about mistakes it made in the accounting
of home loans. This is particularly troublesome in her district, where more
than 80 percent of the borrowers who file for bankruptcy have incomes of less
than $40,000, and consequently are often unable to hire the kind of legal
firepower necessary to counter Wells Fargo's army of lawyers.
"[W]hen exposed, [Wells Fargo]
revealed its true corporate character by denying any obligation to correct its
past transgressions and mounting a legal assault ensure it never had to,"
Magner wrote.
We
shouldn’t be surprised, but we should certainly be outraged enough to finally
take action.
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