Gretchen Morgenson: In Wells Fargo’s Bogus Accounts, Echoes of Foreclosure Abuses

John Stumpf, the chairman and chief executive of Wells Fargo, won a dubious achievement award from one of his interrogators during Tuesday’s scorching hearings on Capitol Hill. The bank’s yearslong practice of opening bogus accounts for customers and charging fees to do so, said Senator Jon Tester, Democrat of Montana, had united the Senate Banking Committee on a major topic for the first time in a decade. “And not in a good way,” he added.

But this was not the first time problematic and pervasive activities at Wells Fargo succeeded in uniting a disparate group. After observing years of abusive mortgage loan servicing practices at the bank, an increasing number of judges hearing foreclosure cases after the financial crisis grew to understand that banks could not always be trusted in their pleadings.

This was a major shift: For decades, the nation’s courts had been largely pro-bank when hearing foreclosure cases, accepting what big financial institutions produced in documentation and amounts owed by borrowers.

“Wells didn’t intentionally educate judges. They didn’t raise their hand and say, ‘Judge, we’re sorry,’” said O. Max Gardner III, a prominent foreclosure defense lawyer who teaches consumer counsel how to represent troubled borrowers. “It was people really digging in and having the resources and the time to ask the right questions about what they were doing with the money.” Those practices included levying improper fees and incorrectly foreclosing on homes.

Tom Goyda, a Wells Fargo spokesman, said: “The housing downturn was a challenging time for our nation, and Wells Fargo has acknowledged that we made mistakes in the handling of mortgage foreclosures along the way. Lenders, investors, along with policy makers and regulators — all sides — learned foreclosure processes had to be addressed, and Wells Fargo made significant improvements to the way we work with customers when they fall behind in their payments and during the foreclosure process.”

During the financial crisis, Wells Fargo was at a remove from Wall Street and was not a big player in creating toxic and complex mortgage securities that were engineered to fail. But the bank’s ability to emerge from the crisis with a relatively good reputation is something of a mystery to anyone who paid attention to its aggressive foreclosure activities.

There were enough problematic foreclosure cases involving Wells Fargo moving through the courts that the bank’s dubious practices seemed as pervasive then as the questionable account-opening scheme does now. And some of the elements of both scandals — improper fees and forgeries — are the same.

  The only difference: Mr. Stumpf, who was named Wells’s chief executive in 2007, has apologized to the customers his bank harmed with its account opening charade. Lawyers who represented troubled borrowers say no such apology came from Mr. Stumpf during the foreclosure mess.

“I sure as heck haven’t seen it,” said Linda Tirelli, a longtime foreclosure defense lawyer at Garvey Tirelli & Cushner in White Plains, who has often battled Wells Fargo. “I don’t remember ever hearing him apologize, because that would admit wrongdoing, and that’s not part of Wells Fargo’s corporate culture. Their culture is about not holding anybody at the top accountable.”

Some judges tried to hold Wells Fargo to account for its foreclosure practices. One was Elizabeth W. Magner, a federal bankruptcy judge in the Eastern District of Louisiana. She was among the first judges to identify problematic patterns in Wells Fargo’s foreclosure practice and to respond with vigor.

In an early 2008 case, she assessed damages and sanctions against Wells Fargo after concluding that the bank had levied fees on Dorothy Chase Stewart, a widowed borrower, without notifying her. This had the effect of pushing Ms. Stewart deeper into default and increasing the amounts she owed.

Judge Magner highlighted Wells’s “abusive imposition of unwarranted fees and charges” and its improper calculation of escrow payments. And, she added, Wells Fargo’s practice of not telling borrowers about the fees they were being charged “is not peculiar to loans involved in a bankruptcy.” Wells had also failed to credit Ms. Stewart with $1,800 that it had charged her for an eviction that did not occur.

An especially egregious aspect of the case involved Wells Fargo’s regular appraisals of the Stewart property. Banks conduct such appraisals when a property is in default to ensure that it is being maintained properly.

But in the Stewart case, the court cast doubt on two of the appraisals Wells Fargo charged Ms. Stewart for in 2005, noting that they were said to have been completed on the same day that Jefferson Parish, the location of the Stewart home, was under an evacuation order because of Hurricane Katrina. In addition, the court found that a unit of Wells had done the appraisals, charging double its costs for them.

In a 2013 Massachusetts case, William G. Young, a Federal District Court judge overseeing a foreclosure, was so distressed by Wells Fargo’s litigation tactics that he required the bank to provide him with a corporate resolution signed by its president and a majority of its board stating that they stood behind the conduct of the bank’s lawyers in the case.

“The disconnect between Wells Fargo’s publicly advertised face and its actual litigation conduct here could not be more extreme,” Judge Young wrote. “A quick visit to Wells Fargo’s website confirms that it vigorously promotes itself as consumer-friendly,” he continued, “a far cry from the hard-nosed win-at-any-cost stance it has adopted here.”

In Tuesday’s Senate hearing, Elizabeth Warren, Democrat of Massachusetts, made a similar observation, comparing Wells Fargo’s stated rules of the road — respecting its customers — with its improper account-opening activities.

When judges criticized Wells Fargo in foreclosure cases, bank officials either maintained that the situation was unusual or that the judge was being unreasonable. Only occasionally did the bank concede that it had handled a case badly.

Responses like these also ring a bell today.

One remarkable foreclosure ruling against Wells Fargo came in January 2015, in a Missouri state court. Judge R. Brent Elliott ordered Wells to pay more than $3 million in punitive damages and other costs for harming David and Crystal Holm, borrowers in Holt, Mo., who fought the bank’s improper foreclosure of their home for more than six years.

“Defendant Wells Fargo’s deceptive and intentional conduct displayed a complete and total disregard for the rights” of the couple, wrote Judge Elliott, a circuit judge in the 43rd Judicial District of Missouri. “Wells Fargo took its money and moved on, with complete disregard to the human damage left in its wake.”

Punctuating his view, Judge Elliott cited the testimony of a bank employee who told the court: “I’m not here as a human being. I’m here as a representative of Wells Fargo.”

Wells Fargo said it was appealing the case.

Finally, there was the scathing 2010 contempt ruling in a Wells Fargo foreclosure case by Jeff Bohm, a federal bankruptcy judge in Houston. To the bank’s argument that unintentional errors, including a computer malfunction, had caused Wells to demand money from two borrowers who had previously settled with the lender, Judge Bohm conceded that mistakes could happen.

“However, when mistakes happen not once, not twice, but repeatedly,” he continued, “and when actions are not taken to correct these mistakes within a reasonable period of time, the failure to right the wrong — particularly when the basis for the problem is a monthslong violation of an agreed judgment — the excuse of ‘mistakes happen’ has no credence.”

Seems as though Judge Bohm was onto something.

Twitter: @gmorgenson

7 Responses

  1. MERS is a nominee as part of a 1031 series of like kind exchanges where is the party that takes title as DOES 1 through 10. NOMINEE INTERESTS ARE INVALID AFTER TTANSFER or 180 days. So if MERS has standing. …well? If you’re not an Insider you’ll never ever figure this …

  2. Its not what it appears. More than meets the eye

  3. I wrote this in response to one of Livinglies’ solicitations we write the editor of the NY Times.

    In 2008, as part-and-parcel of premeditated, brazen, criminal fraud, the Obama Administration, acting for their masters, the English-based, central bankers, decided to help themselves to other people’s money through counterfeiting and forgery.

    They hijacked the portfolios of “loans”, within “Fannie and Freddie- F&F”, as F&F are described as: “Government-Sponsored Entities”, or “GSEs”.

    As “GSEs”, investors to “loans” within F&F, expected they enjoyed protections similar to those provided, to investors in banks, under the FDIC.

    The notion is, in order to protect investors, should “loans” default within F&F (as GSEs), the government will step-in, just as the government (FDIC) will protect investors when a bank fails.

    The “foreclosures” being used to rob American Homeowners are no such thing and are, instead, part of a criminal Scam that has been a long time in the making.

    The “loans” in question were marked for destruction long before they left the closing table and were never “loans”, in the first place.

    They are, instead, an insurance fraud being employed to recapitalize the banks in the wake of any number of criminal behaviors, particularly as those relate to “subprime lending” and “derivatives frauds”.

    The fact the Obama Administration is a willing partner in these criminal behaviors is a profound and knowing betrayal of the American People.

    This is particularly true as “Fannie and Freddie” are currently on the block, while the “loans” that once defined stable families and wholesome communities, are now being sold down the river, to appease banker Greed and criminal malice

    F&F were once created to open home ownership to low income and minority families. They are now targeted for destruction, no less than the families and communities they were once designed to serve.

    Federal Judge Sweeny, in Manhattan, has begun to shed light on the criminal abomination that is the Obama Administration. The fact investors, as ‘Plaintiffs”, in the “Fairholme Action”, will find relief long before any homeowner is afforded any ability to regain their dignity, was always part of the plan…

    To begin to understand this profound criminal betrayal and intent to undermine the property rights and once-Sovereign, financial condition of the American People, it is useful to examine the first betrayal (the MERS) that has been intentionally concealed, even as it is the template that fashioned the theft (RESCAP) of the “loans” within Fannie and Freddie.
    While Eric Holder was an employee, his law firm, “Covington-Burling”, created “the Mortgage Electronic Registration System- the MERS”, The MERS was created to counterfeit titles to American Homes, while employing forgery and fraud.

    Professor Christopher L. Peterson wrote the seminal paper on the MERS, while he was a Law Professor at S. J. Quinney Law School, in Utah. On page 116 of his paper, Professor Peterson explains:

    …mortgage bankers formed a plan to create a single shell company
    that would pretend to own all the mortgages in the country.

    In other words, the bankers created a phony (“shell”) company to counterfeit (“pretend”) an “ownership interest” in American Mortgages. The MERS claims an ability to traffic in some 70 million residential mortgages, which is quite a feat because depositions related to the structure of the company claim there are no employees.

    Professor Peterson is now “Chief Counsel for Enforcement” for the CFPB and as such, a member of “Law Enforcement”.

    Eric Holder and Lanny Breuer once claimed employment, within “Law Enforcement” as members of the Obama Administration and they never prosecuted a single banker during those 8 years. They are now back working for the “Law Firm” that created the MERS in the first place, “Covington-Burling”.

    The fact no bankers were ever prosecuted is peculiar, because Eric Holder’s “Department of Justice- DOJ” conspired to conceal the fact an English-Chinese Bank, “HSBC- Hong Kong Shanghai Banking Corporation” is using American Mortgages to launder terror and drug money for known enemies of the US that are presently killing American Soldiers.

    As part of the conspiracy, the present, FBI Director, James Comey, was an executive on the board of HSBC while it was first discovered to be operating the criminal laundry. He has since left, but, the laundry is still running; America’s enemies are still killing our soldiers and American homes are still being stolen through counterfeit titles, forgery and fraud, in service to a scheme of glaring corruption that is tantamount to Treason.

    Loretta Lynch is also now firmly implanted in this conspiracy, even as her DOJ refuses to disclose these behaviors, through her suppression of the facts inherent to Eric Holder’s “DPA” and her willingness to allow an English-Chinese Bank to conceal the theft of American Property, as protective of a scheme that continues to result in the death of American Soldiers.

    Federal Judge Gleeson analyzed AG, Eric Holder’s DPA, to find, among the violations and charges, already-proven (although, presently, “deferred”): “The Trading With The Enemies Act”; “The Bank Secrecy Act”; “The Anti-Money Laundering Acts”; “The International Emergency Economic Powers Act”
    (Case 1:12-cr-00763-JG Document 23 Filed 07/01/13).
    Eric Holder and the Obama Administration, through their failure to expose the MERS, are also now directly responsible for the poisoning and death of at least, eleven children in Flint, Michigan…

    To say nothing of the death of representative government…

    To say nothing of the death of the Rule of Law…

    To say nothing of the millions of American Families, disrupted, separated, divorced and now victims to the suicides and illnesses that have ensued while our government has sold itself to a foreign, privately-owned and operated, criminal, English-based, central banking cartel.

    How are the counterfeit “loans” in the MERS and Obama’s theft of the “loans” (RESCAP) once said, to be found within portfolios of “loans”, once said to be controlled by Fannie and Freddie, the same?

    They are make-believe; so many kites, that have broken their string and while still aloft, the only thing that roots them to the ground is the shadow of where they once, might have been.

    The criminals know that and in order to redeem their present, “Insolvent” condition, they elected to participate in Securities Fraud and Insurance Fraud.

    There isn’t one, single, legitimate, REMIC Trust and the Pooling and Servicing Agreements, said to control those “Trusts” are merely a mechanism designed to “keep honor among thieves”. The “Trusts” are as “Pretend” as the two shell companies (the MERS and RESCAP) that ever conspired to claim “ownership” of American Homes, in the first place.

    If you Google Bucketeering, you will begin to understand why the banks forged and counterfeited ownership to “loans” that 3rd parties (illegal in and of, itself, as “tertiary financing), whether terror or drug cartels, or the Pension Plans of Police, Firemen, Teachers, Nurses and Municipal Workers had already paid, In-Full.

    The bankers then took the “ownership” (legal, lawfully-recorded titles) of those “loans” and put them in their own pockets, after which they sat back to collect 20 or 30 years worth of “mortgage payments” that are simply the proceeds and coin they are using to run a criminal laundry for terror and drug money in service to “sanctioned” enemies of the United States.

    To suggest any homeowner in this country and beyond, owes the criminal, English-based, central banking cartel anything, other than a brisk investigation and prosecution, is absurd, to the point of Treason.

    ~ Michael Keane 9/11, 2016.

  4. Reblogged this on California Freelance Paralegal and commented:
    I have seen up close and personal what Wells Fargo will do when it wants to foreclose.They have no hesitation about using false documents and even forging the signature of a Texas notary on a document on one case I worked on several years ago. When the notary journal for the notary was reviewed there was no entry for any signature on any document on the date claimed by Wells Fargo. Wells Fargo is not making mistakes. Their actions are intentional.

  5. The “financial crisis” is a deliberate, “Boom-and-Bust-Cycle”, orchestarated by the Criminal Banks, from the outset, to collect on “Insurance Frauds”, aka, “Derivatives”.

    The “REMIC Trusts” are vacant and their “Pooling and Servicing Agreements- PSAs”, that govern those “Trusts” are simply, a blueprint, designed by the Criminal Bankers to dictate who gets paid what, when their Criminal Frauds, bear fruit.

    The “Remics- Real Estate Mortgage Investment Conduits” ceased to be anything of the kind, at least a decade ago and are now, more adequately described as “REMIFs-Real Estate Monopolized Insurance Frauds”.

    The Criminal Bankers are using fraud to recapitalize their present, “Insolvent” condition (Google: 1200 Trillion and derivatives), using forgery (robo-signing), fraud (“Servicing” banks masquerading as “Lending” banks, as but one example) and counterfeit titles: the Criminal Bankers don’t own the “mortgage loans”, the investors that paid them, in-full, do.

    The Criminals used Police, Fire and Teacher’s Pensions, among others, to purchase the “loans” and the 30-day revenue streams to the RES (homes, as listed, within bogus “Trusts”).

    Well… the “Trusts” are empty. Ask David Belanger, he knows… There is no “RES”. The “Trusts” are Frauds, of whole cloth.

    The Pensions have no claim over any of the homes, because the Criminal Bankers placed the lawful titles into their own pockets, after the Pensions paid those “loans”, in-full and the Criminal Bankers then counterfeited the “ownership”, as their own.

    The reason the true titles will never see the light of day is because they have been turned into digitized copies and the paper contracts, destroyed…

    The fact they will remain hidden underlies at least, a decade of Insurance Fraud and any number of other criminal behaviors…

    The digitized copies are now listed within an artificial, electronic, “ownership” boutique”, created to counterfeit and thereby, replace lawful titles (true owners), by Eric Holder’s Law Firm, “Covington-Burling”.

    The counterfeit titles, on fully-paid “loans” are also cleansing terror and drug money, every 30 days (as American Homeowner, mortgage payments).

    The counterfeiting boutique (the MERs), created by Eric Holder’s Law Firm, “Covington-Burling”, is also being used to deny revenue to the 3142 counties, across these United States. Denying revenue, robs communities of “elected officials”…

    It seems likely, “elected officials”, with a proper budget, probably wouldn’t murder children by allowing them to drink poisoned water…

    See, Flint, Michigan.

    ~ Michael Keane

  6. Officials and Judges in Virginia are very slow to believe.

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