Wells Fargo Bank Sues Itself

FoxBusiness.com ^ | July 10, 2009 | Al Lewis

[ClubCaved]

God! This reminds of the time (about 20 odd years ago) when one of the attorneys I worked for in the Antitrust Div. spents weeks writing, re-writing and re-re-writing a massive memo urging that DOJ file suit against DOT over the awarding of trans-Pacific air routes. Time after time after time, I would do all the edits, get his assurance that this was the final version and make the 10+ distribution copies, he would sign off on it and _then_ he would come back with _more_ massive edits.

[GovernmentShrinker]

But you didn’t finish the story! Did the suit ever get filed?

[GovernmentShrinker]

The fact that Wells Fargo is hiring a separate law firm to “defend” against this suit is beyond insane. All Wells Fargo needs to do is release the lien, which should be a quick internal administrative matter following the formal write-off of the “asset” represented by the second mortgage lien. The write-off will have to be done anyway, as will internal recording of the fact that the lien no longer exists — both these technicalities can and should be taken care of prior to the filing of the foreclosure — when the lien doesn’t exist any more, it obviously doesn’t need to be shown on the foreclosure filing.

The idea of engaging a law firm to defend a suit against a worthless asset is patently insane — even if the law firm’s “work” involves nothing more than a routine filing of some boilerplate document, they are still charging for that “work”. Engaging a law firm to defend a suit against a worthless asset which is owned by the suing party is beyond insane. I’m a lawyer by training and a banker by profession, and saying “it happens all the time” doesn’t make it okay. Making huge mortgage loans to people with no documentable income, to purchase homes at wildly inflated prices happened all the time too, and there should have a lot more media howling about it, a lot sooner.

[Wally_Kalbacken]

No issue there - the underwriting decisions were rather foolish and now the lenders are trying to cope with being defacto property managers. And they are not doing much better at that than they did with the underwriting decisions they made years ago. We could probably have an intense debate over which lender was most inept (my vote is WaMu, but it’s a close call.)

I think what you are criticizing is the management of Wells Fargo, and not the legal process which requires listing subordinate lien holders. No doubt they hired certain firms under some blanket agreement to prosecute foreclose actions in certain counties and in some instance hired different firms to defend (nominally) in matters where they have a subordinate lien for the same counties. Obviously the prudent business decision for Wells Fargo would be to contact the firm that has a blanket contract to defend in that county and say “don’t bother with this one”, but Wells and other lenders are so deeply buried in foreclosure administration, they probably weren’t aware. That’s not an excuse - the lenders are so inept, they do not know what the various branches of their organizations (collections, underwriting, bankruptcy, foreclosure, etc.) are doing with respect to any one property.

From the defending firm’s perspective, they may have contacted Wells and asked if they should defend (or merely enter) - and I’d be willing to bet they never got an answer back from Wells, and filed because they were tired of waiting for an response. They also may have a “per click” compensation agreement with Wells which gives them an incentive to file even in what is an absurd situation. That still is a matter of Wells managing it’s business by either responding to the defending firm (with instructions) or establishing ground rules in their engagement agreement that prevent this silliness.

[esquirette]

Well said.

As with all legal questions, “It all depends.”

Again, well said.