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How to Foreclose on Your Bank

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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.

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21 comments

  1. Taylor

    I can’t help but wonder about the extent that this situation occurs with mortgages. I hope more people will step up and make sure they aren’t getting the short end.

  2. vlade

    This was happening with overpaid bank fees few years ago in the UK.

    “Last week, bailiffs raided a Royal Bank of Scotland branch in London to take control of computers, fax machines and a cash till after a customer won a court judgment over more than £3,000 in overdraft charges.”
    http://www.guardian.co.uk/money/2007/jan/20/accounts.saving

    “A branch of the Abbey bank has been given until next Tuesday to repay £2,769 to a customer, or face having its equipment seized by court bailiffs. ”
    http://news.bbc.co.uk/1/hi/business/6276214.stm

  3. Ina Deaver

    The spectacle of Congress repealing or gutting RESPA would be enlightening, indeed.

    Fight fire with fire. Not only are law school clinics for students to get practical experience absolutely a resource that needs to be touted, also most state bars have a weekly telephone bank where you can call up a lawyer and get free help. Most of those calls are family law and tax, and the bar typically provides some FAQ answers for the lawyers running the lines. These need to be beefed up with tactics that ordinary citizens can and should use against the banks.

    It used to be our rule of law, and we need to work to take it back. Clinics are an especially good resource, because those kids still believe in the law. Perhaps the ACLU should do a tour, and train some law students in some of the hot spots? This is the new frontier of civil rights.

  4. BS

    Where is a copy of his letter?

    “The two parties appear finally to be working towards a resolution.”

    I hope this means he gets the bank branch :)

    Link doesn’t go to the correct place anymore. Likely scrolled off.

    1. Audible

      I was always troubled by the prevailing attitude that morality and law do not apply in business. It sickens me what people are able to get away with under the guise of “business”.

  5. Saul Mortgage

    These “lottery wins” are interesting, but let’s face it 100Ks or more have lost their homes, and many more are going to.
    Most slings and arrows just bounce off the uber banks, it’s been discussed how politicians, a good part of the press, a portion of the public – doesn’t really care about nationwide financial rape, they prefer the humility, degradation and blaming of individuals – a bit like overt racism but instead of race, poverty is the crime.
    There are bodies all over the streets in Tripoli today – what me worry?

    1. Audible

      I was always troubled by the prevailing attitude that morality and law do not apply in business. It sickens me what people are able to get away with under the guise of “business”.

  6. EMichael

    While I am not saying this is not a case of “institutionalized abuse”, it certainly could be a case of overworked service staff. Like most industries, banks cut employees to the bare minimums(and beyond) the past two years.

    This could simply be a case of a simple mistake compounded by falling through the ever widening cracks of customer service.

    On a humorous note. The homeowner in question has come out and admitted he is a vampire. Complete with filed dow teeth and fangs.

    http://www.loladelphia.com/post/3403334181

    1. Karen

      The lack of response could be due to overwork, but I don’t think that’s a good explanation for the outrageous forced-placed-insurance move that started the whole fight!

      1. EMichael

        Agreed.

        Could have been a mistake and/or a policy. I have no idea what the answer is, but I would like to know exactly what the profit to the servicer is on such a forced insurance policy.

        1. EMichael

          You gotta follow the money.

          Did the bank profit over the transaction versus their costs?

          I worked in auto finance for many years and placed forced insurance on many loans. I received 2 to 3% from the insurer for the deal. Trust me, the work involved made the process a big loser for me.

          I hesitate to claim abuse on the lender without knowng whether they made any cash on the transaction.

        2. Matt

          Google forced mortgage insurance, with 4x the rates. The smart servicers have their own or related party insurer. Read also the HAMP servicer abuse of borrowers tricking them into the penalty box of servicer escrow funds as the name of the profit game for servicers is the foreclosure, not the loan servicing.

  7. steelhead23

    What amuses me here is that this gent expended more energy in getting his QWR right – for a claim of about $2k – than mortgage servicers are spending on foreclosures. Given the trouble with MERS, I’m guessing that mortgage servicing is going to become a more responsible, higher cost business into the future.

  8. Noni Mausa

    You can hear a highly entertaining, streaming radio interview with this fellow here: http://www.cbc.ca/video/news/audioplayer.html?clipid=1799989254 beginning around 17:22

    Quite interesting how thoroughly Wells Fargo ignored this guy. I can’t wait to see how it comes out.

    And I think this sort of thing is institutional, not negligent, and industry-wide. A friend of mine had Countrywide try to foreclose on his house, newly purchased and not in default to anyone, in a very sneaky way. The whole long story is here: http://www.angrybearblog.com/2010/07/countrywide-goes-kafka-first-person.html and is well worth the headscratching.

    Noni

  9. Francois T

    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.

    Yves,

    Why do you think Timmy Turbo Tax Geithner blocked all the funds targeted to provide a modicum of assistance to distressed homeowners?

    They hate us because they do not want us to be free to oppose them.

  10. Disgustapated

    Wells tried to do this to me as well. I purchased the required amount of insurance agreed to in the docs I signed at closing. They responded with “read them again – it says we can demand any amount we deem necessary”. Thats not what the docs said – so I refied with my credit union – and they use a mortgage company that has a record over the last 30 years of selling *zero* mortgages to other organizations. (I asked before I refied.) Anyway, Wells sent a letter stating they had done me the service of buying the insurance for me, so I called and told them they could eat it.

  11. Mikey

    BofA, is doing this to me. Long story short, they ‘bought insurance for me’, after I got in a dispute over HOI, got Allstate right away, so there was almost no lapse in coverage. But, the BofA, says they didn’t get the letter, Allstate assures me they sent it…so now, BofA adds 2 THOUSAND DOLLARS to an ‘escrow’ account…and my payment goes up, and they won’t even accept anything less, “until the escrow is paid off”…bastards. 2k for less than a month’s HOI?
    Where are these letters? How does one proceed…I think I’m going to sue a bank…in small claims…sounds like a winner.

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