'Whoops We Sold Your House' -- Wells Fargo Owns Mistake, Investment Firm Owns Home
On the California Bankruptcy Attorney Blog yesterday, the lawyers at Howard Nassiri summarized and linked out to a column in the Los Angeles Times about an unfortunate couple who had their Long Beach, Cal. house sold out from under them by their mortgage lender.
Mike and Ellen Kahara arguably bought too much house back in 2004, financing it with an interest-only loan. When the economy hit the fan, they were unable to make some of their mortgage payments. This was no case of strategic default; the Kaharas were struggling (and presumably don't have several other homes and "all the cars" to move into).
Enter Wells Fargo. The bank declared the Kaharas in default in August 2009, and advised them to apply for relief under the Making Home Affordable program. In December, WF notified the Kaharas that they were eligible for a trial modification program that would reduce their monthly payments to $1,400. They made those payments, in full, as the bank continued to assess their eligibility for permanent modification. At least one blogger suspects foul play in the indefinite extension of the trial program.
On August 11, the Kaharas received a letter informing them that their application for a permanent modification had been rejected. Bad news, no doubt. But the letter also noted that the couple would have 30 days to explore other options with the lender, and included the following line: "No foreclosure sale will be conducted and you will not lose your home during this 30-day period."
Seems pretty clear. Except it didn't work out that way:
But on Aug. 18 there was a knock at the door around 8 in the morning. Mike Kahara said a young man wearing a white polo shirt and dark slacks introduced himself as Sebastian Cruz of the investment firm Pacifica Cos.
Cruz said his firm had purchased the house and that he would offer the Kaharas $1,500 if they'd agree to vacate the property within two weeks.
He produced a document with Pacifica letterhead informing the Kaharas that their home "has changed ownership through the foreclosure process." It threatened legal action if the couple didn't move out.
Oops. Wells Fargo has admitted it goofed. Not by selling the Kaharas' home, mind you, but, rather, by promising that it wouldn't.
Jennifer Langan, a Wells Fargo spokeswoman, confirmed that the Kaharas' house was sold Aug. 16, just five days after the bank decided not to modify the couple's loan.
She said the bank shouldn't have told the Kaharas that their home wouldn't be sold within 30 days. "It was clearly a mistake that we put that in the letter," Langan said.
While the bank has committed to "review the family's complex situation," these people are being threatened with legal action if they don't vacate their home. They're considering declaring bankruptcy in hopes of staving off eviction (quite possibly a better strategy than this guy's). And they've hired a lawyer to sue Wells Fargo. (The Times' Comments Blog -- which is a great concept -- has opened up a forum for the public to suggest further strategy for the Kaharas.)
I'm all about paying your debts, and not buying things you can't afford. But I also hope Wells Fargo finds some meaningful way to make up for their admitted mistake.
Posted by Eric Lipman on September 15, 2010 at 10:38 AM | Permalink
| Comments (3)