Submitted by Gonzalo Lira
This Is What Brian and Ilsa Said To Their Bank: “Show Me The Note”
So the week before last, I wrote about Brian and Ilsa, a retired couple in their mid-to-late sixties, living in a house in the Southwest that had—unremarkably—gone underwater.
They had tried to refinance their home mortgage, under the auspices of the HAMP, the Home Affordable Modification Program. HAMP was part of the Financial Stability Act of 2009—the famed “Stimulus Package”.
Under this program, the principal of Brian and Ilsa’s mortgage loan would remain the same—they would not be getting a free ride. (Some readers mistakenly thought that they would. See note at bottom.)
But though the principal of their mortgage loan would remain the same, the period of their mortgage would be extended—and the loan itself would be refinanced with a lowered mortgage rate of 2.75%, from the 6.25% of the original mortgage.
Therefore, their monthly payments would go down roughly 40%—a significant amount for them, especially after their retirement savings had taken a big hit following the Global Financial Crisis.
What had been dreadful about Brian and Ilsa’s case was that, though they qualified for HAMP—and indeed, HAMP had contacted them, at least initially—they were given the bureaucratic runaround for several months, before they were finally allowed into the program.
And then, three months after their mortgage had been lowered, with no warning, they were told that they in fact did not qualify—even though the program fit them like a glove.
Indeed, the program had been tailored for people exactly like them: Retirees, who had suffered unforseen medical expenses on top of having their house go underwater. People who weren’t looking for a handout, but just to refinance so as to take advantage of the now-lower interest rates, and thereby lower their monthly payments.
But now, the bank was saying that they didn’t qualify. Out of the blue, no explanation, no appeal, nothing: They simply no longer qualified. To add insult to injury, they were also told that not only did they owe the difference in mortgage payments—they also now owed a penalty fee, for “incomplete payment”.
Brian and Ilsa tried complaining about the unfairness of the situation, but once again, they were given the runaround.
Then, they and I both discovered that a lot of the people who were initially said to qualify for HAMP in fact did not qualify—they were added to the program so that banks and servicers could collect Federal government bonuses, then bumped off the program once their three-month “trial mod” was over.
It didn’t matter if they qualified or not—it was all just some sort of sick game with these people, done so that they could get some of that Federal government bonus money. The proof of this was the undisputed testimony of a whistleblower—whose testimony was of course ignored by the mainstream media.
After all this heartbreak and frustration—and fear—Brian and Ilsa had reached the end of their tether: Ilsa had said, essentially, Fuckit, and was urging her husband Brian for them to strategically default. Brian was wavering, though he was as equally outraged as his wife.
The point of my piece was, If and when solid upstanding middle-class people such as Brian and Ilsa ever do throw in the towel and let out a collective Fuckit, then it’s curtains for the American Republic: You cannot have a viable society where the backbone of the country thinks that following the rules and the law is for suckers and chumps.
With the facts of their story in hand, I went off and wrote up my piece, posted it—and watched as it garnered 50,000 hits in a matter of days—over 70,000 hits as of today, eleven days later—and it’s still going strong.
I’m a pretty good writer—but I’m not that good of a writer: Clearly, my piece touched a nerve. Touched a nerve? More like gouged it out, put electrodes to it, then went all Abu Ghraib on it—that’s how vehement some of the reactions to my piece were.
Life goes on. Between when I last spoke to Brian and Ilsa, and when the reactions to my post started rolling in, Brian and Ilsa’s story continued, of course—
—and it took quite the amazing turn over the last couple of weeks.
“And we have you to thank,” Ilsa told me.
“Oh?” I said.
“Yes indeed,” said Brian—and then he explained:
While interviewing them, I had also been working on my “The Second Leg Down of America’s Death Spiral” post—the one where I swore up a storm.
In that piece, I discussed the mechanics of the Mortgage Mess, and how a seemingly trivial issue—chain-of-title—could well clog up the system and bring a collapse in the mortgage market.
I had explained how the banks, in their urge to securitize, had been sloppy with the mortgage notes. I explained how, potentially, this could mean that homeowners with mortgages might well be able to get out of their debt, since no one could now show who legally owned the note. Not just people in foreclosures—everyone with a mortgage that had been improperly handled.
While interviewing Brian and Ilsa, I had talked about these issues to them, at some length. Whenever they needed to take a break from telling me their own story—which as you can imagine got them wound up to high heaven with frustration and worry—I would stop and tell them about the Mortgage Mess, and what I was finding out about it: The crooked law firms manufacturing documents, the shyster banks who owned—outright—Congress. The whole sordid mess.
Also, talking to Brian and Ilsa about the ins and outs of the Mortgage Mess was my way of wrapping my head around the complicated issues at hand, and making sense of it before I wrote about it.
I thought that Brian and Ilsa were only half-listening to me, out of politeness, whenever I rambled on about MBS’s and chain-of-title and MERS and all the rest of it—but they paid me a lot more attention than I realized, at the time.
(Note to self—consider adding another aphorism: Always assume people are listening to you more closely than you realize, even if they seem to be distracted.)
A desperate person with a little bit of knowledge can be a dangerous thing—as Wells Fargo, Brian and Ilsa’s bank, soon found out.
Last Monday, October 4, after I had finished interviewing them and was busy writing my original post on the pair, Brian mulled over what I had told him about chain-of-title and the Mortgage Mess—I can just see him, head lowered, looking up: The epitome of the Kubrick Stare.
Brian dashed off an e-mail to his bank that night—a quick post, where he explicitly said, “I want to see the loan note where it says I owe you money, or else I’m contacting my lawyer and halting payment on my mortgage.”
The very next day, someone from Wells Fargo called them.
Not a machine, not a customer service rep in India—an actual, honest-to-God, alive-and-kicking bank executive.
She apologized profusely about the HAMP screw up—said that Brian and Ilsa qualified, they qualified, they qualified!, and that she would be the one to “straighten out their situation”.
Brian and Ilsa couldn’t talk that Tuesday, when the bank executive called. And for various reasons, they couldn’t talk Wednesday either—they finally talked to the bank executive on Thursday . . .
. . . and during those three days, it was the executive who chased them: Two e-mails to their AOL account, two phone calls on their answering machine.
On Thursday, when they spoke, the bank executive was sweetness and light—she told them that Ilsa and Brian qualified for HAMP, that they would get refinanced, that they would not have to pay the difference in mortgage of the last three months—“Your lower mortgage rate is locked in!”
And as to the $84 penalty fee, which had driven Brian in particular up the wall: It was waived.
Ilsa told me, “It was the nicest conversation we’ve ever had with a bank executive.”
The executive promised to have the papers drawn up, ready to be signed before November 1.
That’s right: November first. After dicking them around for months on end, Wells Fargo all of a sudden went from turtle-speed to light-speed—to warp-speed—boom!—just like that. They didn’t even engage thrusters, Captain—it was warp drive the instant Brian e-mailed that threat.
Threat?, you say. What threat was that?
The threat Brian laid down, in the e-mail he sent Monday night:
Show me the note, motherfucker!
As I discussed in some detail in my “Second Leg Down” piece, the process of creating Mortgage Backed Securities inherently created ambiguity as to the note holder. This ambiguity in and of itself was not the problem—the problem was, along the way, the chain of title of the note was broken in a lot of mortgages. Thousands of them—maybe even millions.
At the same time, there was massive fraud by so-called “foreclosure mills”—bottom-feeding law firms hired by the banks to carry out the judicial process necessary for foreclosure and eviction. According to credible reporting (as I have mentioned, Yves Smith at naked capitalism has been all over this), the foreclosure mills were not only falsifying signatures, but they were outright fabricating documents—in short, committing massive perjury.
So between these two issues—broken chain-of-title, and systematic document forgery by the foreclosure mills—all of a sudden, the banks have a massive problem on their hands: Legally, their ownership of the note can be challenged—and if the blatant illegalities of the foreclosure mills touched the particular note, then its foreclosure could be in question.
All of a sudden, massive numbers of foreclosures and mortgages could be called into question.
So when Brian e-mailed and asked about the note of his mortgage loan? That was like a cattle prod to the crotch—that woke up Wells Fargo.
There was a reason the bank executive called them back the very next day, and warp-speeded their HAMP refinance: Brian and Ilsa’s note is probably either lost, or it’s been irretrievably besmirched by the broken chain-of-title mess, or the foreclosure mills mess, or perhaps both.
By refinancing, a new note is generated on Brian and Ilsa’s mortgage loan: Pristine and copacetic. They have to sign this new note in order to get the refinance. It doesn’t matter how the loan is refinanced—under HAMP auspices, or by any other means—once the homeowners sign on the line which is dotted, all of Wells Fargo’s troubles with that particular loan vanish—
—but they have to get people like Brian and Ilsa to sign: No tickee, no laundry.
I explained this issue to Brian and Ilsa, and furthermore told them that, insofar as their relationship with the bank is concerned, they’re in the driver’s seat:
If they wanted to? They could insist on seeing the note, hire lawyers, and take this to court—where Wells Fargo would lose.
The bank would lose because, once Well Fargo fails to produce their note, or the note’s chain-of-title is shown to be irremediably broken, the judge would be left with no choice but to declare that Wells Fargo has no standing to foreclose and evict Brian and Ilsa from their home. If Wells Fargo can’t produce a valid note, who are they to claim Brian and Ilsa owe them money?
This is how Brian and Ilsa—and the millions of other homeowners with mortgages, not just people being foreclosed upon—could wind up with their house scot-free, while the banks—and the Mortgage Backed Security holders—would be left eating the losses.
(Very important note: In my previous post, I skipped these specific legal steps, concerning how exactly homeowners could potentially wind up walking away from their mortgage loans, yet keeping their houses. Most important of all, I failed to explain how a broken chain-of-title nullifies a bank’s standing in court to bring about foreclosure and eviction proceedings. This failure of mine happened because I was so into the material that I didn’t realize that ordinary readers might not see or know the specific steps that would lead to a homeowner giving the shaft to their bank. I hope I have clarified the issue with the above explanation. Please accept my apology, and excuse my mistake.)
“If you play your cards right,” I told Brian and Ilsa over the phone, “you could get your house for free.”
Like I said in my first post about them: Brian and Ilsa are salt-of-the-earth people.
“But we took out a mortgage—we owe that money,” said Brian. Ilsa said, “All we want is what we were offered: A lower monthly mortgage payment.” Then Brian added, “We don’t want to take advantage of anybody—that would be wrong.”
Wells Fargo is lucky—how many other people are going to act as decently as Brian and Ilsa?
Actually, that’s the wrong question: Which of the banks, or the bank executives, deserve to be treated so decently?
I can’t think of a one.