Kamala Harris, then California state attorney general and now a U.S. Senator, won a settlement in 2016 from the five largest mortgage-holding banks for illicit foreclosure practices.
Wells Fargo had to pay more than $3 billion.
This settlement came down after numerous other national and state Wells Fargo settlements over other illicit mortgage practices — such as charging mortgagees extra for locking in their rates. To understand the breadth and depth of Wells Fargo’s cheating and brutality, go to Google and type in such phrases as “Wells Fargo mortgage settlement” or “Wells Fargo mortgage scandal.”
These scandals spewed forth concurrently, and a few years after Wells Fargo swallowed Wachovia in 2008 and 2009. Wachovia had laundered hundreds of billions of dollars for Colombian and Mexican drug cartels between 2004 and 2007, but Wells Fargo paid only $160 million in a 2010 settlement. Wells Fargo knew about the money laundering before acquiring Wachovia, and set up a contingency fund.
Most homebuyers — whether buying an apartment or a house — rent money. A mortgagee may end up paying twice the amount of the loan over decades because of the rate structure. A typical co-op or condo mortgage will jack up a household’s monthly housing cost by a factor of at least two because the mortgage payment often at least equals the monthly maintenance.
If you take out a mortgage for $400,000 at 5 percent interest, your monthly payment in interest alone will be around $1,700. For a co-op or condo selling at around $485,000, monthly mortgage payments of around $3,000 are common.
The monthly maintenance would be only about $900 for the condo, or $1,300 for the co-op.
Riverdale’s housing includes many thousands of co-ops, condos and houses — most of which have mortgages on them. Do the mortgage firms like Wells Fargo continue their illicit practices now in Riverdale? My husband and I had an illuminating experience.
Tired of miserable Bx10 bus service, we sought a co-op apartment near a subway station, and found a foreclosed unit in Fieldston being sold by HSBC, as a trustee of Wells Fargo, the mortgage holder. The people who lose the apartment still occupied the unit and told us that Wells Fargo ignored the judge who ordered the financial giant to work with the family.
Instead, Wells Fargo simply forged ahead with the foreclosure without developing any plan for the family to pay the mortgage and stay in their home.
We suspended judgment about whether this story was objective truth, because we were hearing only one side. However, it sounded like Wells Fargo’s machinations during the housing crisis of 2007-08, a first red flag.
We made an offer for the unit. For reasons of its own, Wells Fargo/HSBC used a law firm based in Rochester to draw up the contract. The contract sent to our lawyer applied only to privately owned houses, a second red flag highlighting incompetence of the seller and seller’s law firm.
We paid attention to the details of this proposed contract because the bank asserted that it was non-negotiable. Many items had no relevance to a co-op apartment. For example, the seller took no responsibility for possible presence of Chinese drywall, or whether or not the pipes had been winterized. Overall, the document shed responsibility onto the buyer.
The real deal-breaker also shed responsibility. The seller told the buyer to get title insurance because the seller does not guarantee that it has the right to sell the property. Our interpretation of this clause: The seller may have taken this property, although the mortgagee may bring a good court case to retain ownership.
The buyers would have to shoulder the consequences of Wells Fargo’s actions.
Seller’s law firm may assert that this clause is simply standard language for the sale of a foreclosed home. However, in the context of the past practices of Wells Fargo, it is anything but a standard clause. It is the telescope that lets us see into the universe of the mortgage crisis and its possible continuation into the present, and into Riverdale.
We rescinded our offer.
Wells Fargo may be operating in the Riverdale mortgage market in the old, corner-cutting way that led to its mortgage foreclosure scandal of a few years ago. The old Wells Fargo/Wachovia culture may be bedrock foundation to the company, its trustees and their law firms.
That contract reveals a destructive combination of ruthlessness and incompetent inattention. Other mortgage holders may operate now in Riverdale with such ruthlessness and incompetence.
The industry of expensively renting out money to homebuyers rests on two phenomena: The public policy-caused housing shortage, and the American dream. For profound insight into the American dream, see Herman Melville’s “The Confidence-Man.”
For our view of some public policy contributions to the housing shortage in large American metropolitan regions, find the book I wrote with Rodrick Wallace in the 1990s, “A Plague on Your Houses: How New York City Was Burned Down and National Public Health Crumbled.”