A16 Economy & Business
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THURSDAY, OCTOBER 21, 2010
Wells Fargo dismisses foreclosure doubts CEO is challenged
legitimacy of foreclosures. The vice president, Xee Moua,
MICHELLE SINGLETARY The Color of Money
Needing help on a loan isn’t a reason for scorn
B
rett Radosta is not a dead- beat. And yet to hearmany
people tell it, Radosta—whose home inmetro Atlanta is sched- uled for foreclosure by Bank of America—ismaking out like a bandit because there’s a possibili- ty hemight get a loanmodifica- tion. The criticismI get isn’t about
Radosta personally, but about homeowners like him. “Most peoplewithmortgages
they could not handle and should not have gotten did not care about anyone except themselves,” a readerwrote tome. “They got taken because theywere greedy. And nowtheywant everyone else to bail themout, including those who did nowrong.What about those of uswho did not give into temptation and livedwithin our means?What about good old- fashioned personal responsibili- ty?” Another reader asked—his
comments drippingwith con- tempt for those, like Radosta, in foreclosure: “When you buy something, don’t you have a per- sonal responsibility to know, or at least think, you can afford it?” In some respects, the critics
are right. Radostawasn’t thinking about
themacro economywhen he took out a $412,000 home loan in 2006.Hewasn’t thinking that he andmany like himwould be- come part of the nationwide trag- edy ofmass foreclosures.He wasn’t concerned that his deci- sion—alongwith other deci- sions by borrowers and lenders —would help push us into the current financial crisis. The 40-year-old father of four
was only thinking about his fami- ly.He justwanted to do better for them. Radosta left his salesman- ager job at a soft-drink bottler to become an entrepreneur. And for awhile, itwasworking. Radosta became the co-owner
of an eco-friendly day-care center that got national attention.He was also buying and reselling homes to low-income families. When he started his business, thingswere goingwell economi- cally (or sowe all thought). Real estate priceswere continuing to go up, and as a result, lenders were handing out home loans likeHalloween candy. Sowhen Countrywide Finan-
cial offered himan interest-only loan, he says he believed at the time that he could afford the mortgage. “My goalwas after 10 years,
businesswould be great and I would havemoremoney,” Rados- ta said in an interview. “I thought Iwould be able to afford the pay- ments based on the economy.” Was he too optimistic? Yes. The economy tanked, real es-
tate busted, and Radosta lost most of his income.He’s no lon- ger an owner of the day-care cen- ter.When he couldn’t findwork, he and hiswife started a fitness business.Hiswifeworks part time as a substitute teacher. For a while, Radosta onlymade half- payments on hismortgage. Then inMarch, he quit paying alto-
getherwhen the foreclosure pro- cess began. Radosta admits hemademis-
takes. But do he and somany other homeowners facing fore- closure deserve to be crushed withmean-spirited, contemptu- ous criticism? No. When Radosta bought his first
home for $59,000, he said itwas a tough process. Thatwas not the casewith his recent home loan. “I don’t play the victim,” Ra-
dosta says. “But itwas easy. It was too easy. In hindsight, Iwas overconfident.” Radostawas hoping hewould
getmore time to try to save his homewhen Bank of America, which took over Countrywide, announced that itwas freezing foreclosures and reviewing cases amid reports thatmortgage loan servicers signed thousands of foreclosure documentswithout verifying the information. But after only 10 days, Bank of
America lifted the freeze and said itwould proceedwith its foreclo- sures. “I find this very confusing and
stressful,” said Radosta,whose home is scheduled for foreclo- sure onNov. 2. Bank of America is reviewing
Radosta’s case, and hemay be able to get help through the fed- eralMakingHome Affordable program, said Jumana Bauwens, a spokeswoman for the bank. Bauwens said even though the
Radosta home is still scheduled for foreclosure, TreasuryDepart- ment guidelines allowthe bank to postpone the salewhile the pa- perwork for themodification is being reviewed. And even if Ra- dosta doesn’t qualify for the fed- eral program, the bankmay at- tempt to identify another home retention option, she said. “We are honestly trying to
work very hard to help asmany people aswe can stay in their homes,” Bauwens said. I ask Radosta if that’s fair. I tell
himmany people believe he’s get- ting something he doesn’t de- serve if Bank of America does modify his loan to something he can nowafford. “I’mnotmaking out like a ban-
dit,” he says, fighting back tears. “This is humbling,” he says.
“It’s embarrassing.My children are confused.Mywife is con- fused. As a father, I feel responsi- ble for this. I think, as an entre- preneur, I took toomany risks. I own that. But does thatmean I have to live on the streets?What contribution do Imake in that environment? I thought Iwas do- ing things right.Obviously I wasn’t based onwhat is happen- ing tome now.”
Readers can write to Michelle Singletary at TheWashington Post, 1150 15th St.NW,Washington, D.C. 20071. Her e-mail address is
singletarym@washpost.com. Comments and questions are welcome, but because of the volume of mail, personal responses may not be possible. Note that comments or questions may be used in a future column, with the writer’s name, unless a specific request to do otherwise is indicated.
by analyst who notes talk of ‘robo-signing’
BY DAVID S. HILZENRATH Banking giantWells Fargo said
Wednesday that its business shows no signs of the looming crisis some analysts fear the in- dustry faces from shoddy lending and foreclosure practices. “We are confident that our
practices, procedures and docu- mentation for both foreclosures and mortgage securitizations are sound and accurate,” chairman and chief executive John Stumpf said in a news release as the bank announced a third-quarter profit of $3.3 billion. Stumpf’s assertion appeared at
odds with a March deposition in which a Wells Fargo vice presi- dent of loan documentation de- scribed engaging in the sort of “robo-signing” that has raised widespread questions about the
said she signed as many as 500 documents in the span of two hours attesting to the accuracy of foreclosure paperwork. Moua said she neither verified the infor- mation nor understood the state- ments she was signing. Checking the numbers was
“not part of my job description,” she said. Some analysts and investors
say slipshod or fraudulent pro- cessing of foreclosures could ex- pose banks to costly litigation, hurt their ability to get delin- quent loans off their books and paralyze real estate markets still struggling to recover from the housing collapse. In addition, some analysts pre-
dict that Bank of America and other big banks could be forced to issue huge refunds to investors because the banks misrepresent- ed the quality of loans or bungled the paperwork when they pooled the loans into securities and sold them to investors. On Tuesday, the Federal Re-
serve Bank of New York said it had joined a group of investors calling on Bank of Americato buy back billions of dollars worth of mortgage securities because of paperwork issues. Wells Fargo reaffirmed its re-
cent assurances, saying it is not threatened by those problems. “We ensure appropriate docu-
ments for loans in foreclosure are assigned in compliance with local laws and investor requirements,” the bank said in a slide presenta- tion for investors and analysts. “Legal documents related to
securitizations appropriately transferred ownership,” the bank added. Ona conference call withWells
Fargo executivesWednesday, one analyst noted allegations that the bank engaged in robo-signing and said “there is a great deal of speculation that at some point you guys are going to cave and we’re going to find out all this bad stuff about your foreclosure pro- cedures.” In response,Wells Fargo’s chief executive said that “humans do
make errors” and that “if you find an error, we’ll fix it.” In one con- tested foreclosure, Stumpf said, a judge sided withWells Fargo. As for any demands thatWells
Fargo buy back mortgages from investors, the bank said its expo- sure is manageable and its re- serve of $1.3 billion to cover such claims is adequate. During the quarter that ended
Sept. 30, Wells Fargo set aside $370 million for mortgage loan repurchase losses, compared with $382 million in the second quarter. The company said that at the
end of the third quarter it faced demands that it repurchase loans with an original balance of $3.8 billion, down from $4.3 bil- lion at the end of the second quarter. The bank did not say which institution had demanded the repurchase. In the telephone briefing,
Stumpf told investors and ana- lysts that the third quarter was “the best quarter in our compa- ny’s history.”
hilzenrath@washpost.com Amateur sleuths tackle the mortgage mess mortgage from A1
paperwork could be a coverup for something even more serious. And economists worry that the fragile housing market, where one in four houses on sale is in foreclosure, could take a devas- tating hit. Although the uproar over fore-
closures might seem sudden, for the activists, it was a long time coming. Epstein, 45, a George Mason
University graduate who moved from the Washington area to Florida for the sunshine 13 years ago, first began to suspect some- thing was wrong in February 2009 after she was served foreclo- sure papers withoutany acknowl- edgment that she had applied for a loan modification. Redman, 35, said he knew
there was a problem as early as January 2008, when he was try- ing to help his fiancee fight fore- closure and noticed that one of the key documents that proved ownership of the loan had suspi- cious signatures. The Ices’ eureka moment came
late one night in early 2009 when Ariane was looking at the 700 cases in their database and no- ticed that a lot of the problematic paperwork had been signed by the same people. As the four of them continued
to investigate the issue, the months became filled with self- doubt. “Plaintiffs’ attorneys were
scoffing at us; judges were laugh- ing. You get to the point where you think, ‘Maybe I’m the crazy one,’ ” said Thomas Ice, 50. The group members, who are
on the east coast of Florida, where nearly half of thehomeson themarket are in foreclosure,was soon joined by like-minded law- yers, homeowners and activists on the west coast. Together, the growing movement began to or- ganize events at bar association meetings, host happy hours for distressed homeowners, and fol- low prominent public officials wherever they were speaking to get their attention. They launched Web sites to get the word out to homeowners’ attor- neys around the country. Larry Schwartztol, aNewYork-
based staff lawyer with the Amer- ican Civil Liberties Union, has
ship, set up a Web site,
4closurefraud.org, where he ag- gregated and analyzed key court documents related to faulty fore- closures. It was an instant hit — the Huffington Post of foreclo- sures — with Redman’s snarky commentary, use of large pictures and graphics to explain complex subjects, and his apparent glee— signified by an animated laugh- ing “Jerry”— when he discovered a new way to attack the banks. It was Redman’s Web site,
which is now being funded by a local lawyer, Carol C. Asbury, that took the lead in drawing Presi- dent Obama into the foreclosure controversy this month by mak- ing a major issue out of a little- known notary bill, several law- yers around the United States said. Redman said that a reader had e-mailed him about the bill that had sailed through the Sen- ate and was sitting on Obama’s desk. The bill would make it easier to foreclose because notary signatures would be valid across state lines. Epstein, a single mom who
once worked as a cancer nurse, became the group’s liaison to homeowners, setting up an on- line discussion site for them to vent their frustrationsanddebate strategies. For months, she fired off up to
NICHOLAS R. VON STADEN FOR THE WASHINGTON POST
Michael Redman and Lisa Epstein, at the Palm Beach County Courthouse, joined forces with two other people in Florida in investigating potentially fraudulent foreclosure paperwork.
been working with Epstein’s group to investigate whether Florida courts violated due proc- ess by short-circuiting normal procedures in foreclosure cases. He said the research the group is doing is “extremely impressive” and “indispensable.” Although there was no formal organization behind their effort, each of the activists took on a distinct role. The Ices and seven other law-
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yers at their firm began deposing “robo-signers” at major mortgage companies, and, in an unusual
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move in the competitive legal industry, they began distributing the transcripts online. Homeowners’ attorneys na-
tionwide began using the docu- ments to defend their clients. Thomas Cox, a lawyer in Maine, saw Ice Legal’s deposition of Stephan, the Ally robo-signer, and decided to depose him again for a case in his state in June. Cox was able to get his client’s foreclo- sure judgment vacated. Redman, who had been work-
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five letters a night to officials, judges or anyone she could think of after her daughter went to sleep. Her letters were prone to hyperbole, but her explanations of the potential for fraud in various steps of the foreclosure process were laid out. In one, she wrote to the Florida Supreme Court: “I am outraged by the perfidious harvest poisoning the financial and emotional well be- ing of individuals worldwide due to the appalling opportunism of Wall Street’s historic, unrequited love affair with mortgage backed securities.” The first major lender to take
corrective action on foreclosures —Ally Financial, which is majori- ty-owned by the U.S. Treasury — has declined to comment about what prompted it to freeze fore- closures Sept. 20, but Epstein, Redmanand the Ices say they and others who are defending home- owners applied so much pressure on the company that it would have been difficult for it not to act.
On April 28, one week after the
four activists had staged a rally at the courthouse in the state capi- tal, they had their first major breakthrough: The Florida attor- ney general’s office announced an investigation into a “foreclosure mill” law firm called the Florida Default Law Group for allegedly presenting misleading or false documents to courts. Knowing that the lawfirm had
been hired bysomeof the nation’s largest lenders, Epstein and Red- man went to the local courthouse and began delving into its filings. It wasn’t until last month that
their work began to draw nation- al attention. The Florida Default Law Group confirmed in court filings Sept. 7 that the foreclosure documents that had been signed by Stephan, the robo-signer,“may not have been properly verified.” Redman posted the news on
hisWeb site on Sept. 14. “ALL OF THESE AFFIDAVITS FROM THESE CHARACTERS ARE IN- VALID IF CHALLENGED!!!,” he wrote, predicting it would affect “HUNDREDS OF THOUSANDS OF CASES!!!” One week later, Ally Financial announced that it would halt foreclosure sales in nearly two dozen states. At least four other major mortgage companies fol- lowed suit.
chaa@washpost.com
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