AFSCME 3357-HOF'S BLOG

Wells Fargo Wagon Rolls ove Subprime Borrower
Attorney Hits Back with $1.25 million Judgment.

Last month, I ran across this item, 28 year-old attorney Brian Maul won a $1.25 million jury verdict against Wells Fargo for falsifying his client's mortgage documents. Punitive damages of $1 million made up the majority of the verdict amount. According to the article, the Wells Fargo loan officer inflated Kimberly Thomas's savings by a factor of ten and almost doubled her stated income so she would qualify for mortgage. When Ms. Thomas got to the closing table, she was surprised to say the loan would cost her $4,700 per month rather than the $3,000 per month she anticipated. Now the house is worth $90,000 less than what Thomas paid for it.

I congratulate Ms. Thomas and attorney Maul on the courtroom victory, but most consumers aren't going to find such able representation. They're just going to give up.

This loan is the type of crap that our lawmakers are lining up to pay $700 billion for. No, actually that's not even correct, the most toxic assets are the tranches, or slices of multiple nonperforming loans that have been securitized. In many cases, its not clear who has the right to foreclose on the loans.

That's why it's crucial that bankruptcy relief be in the bail out legislation. As it stands now, if a homeowner wants to stay in the house that is mortgaged over its value, the homeowner has to pay the whole principal and interest of the debt, even if the loan terms are predatory. This is a recipe for foreclosures and vacant properties blighting neighborhoods. Other than home loans, most other loans can be written down in bankruptcy to the value of the collateral. Nevertheless, banking industry lobbiests still seem to have clout, and it is doubtful whether bankruptcy relief will be part of the bill to be passed. Some Democrats, including Barack Obama, are willing to give in on the bankruptcy provision to get the bill passed. That's a mistake. They will never have better bargaining power on this issue than they have right now.