Good old Wells Fargo is up to their tricks again. Only this time, they may be playing with fire.
If you haven’t already heard, Wells Fargo instituted a policy that went into effect on 5/1/12. From now on, they are refusing to waive any deficiency rights for their Freddie Mac short sales. This, despite the fact that Freddie just instituted a policy on 2/15/12, specifically barring any lender/servicer from requiring deficiency language in their short sale approval letters. The new policy reads “Reinforcing the requirement that the Servicer, for itself and on behalf of Freddie Mac, must waive all rights to seek deficiencies for short payoffs and deed-in-lieu of foreclosure transactions on Freddie Mac Mortgages that have closed in accordance with the Guide”.
So, what did Wells Fargo do with this requirement? They basically gave Freddie Mac (and distressed homeowners) the proverbial “middle finger”, and instituted a policy that REQUIRES that ALL Freddie Mac mortgages will have the following language in the approval letters they issue: “With the exception of a Home Affordable Foreclosure Alternative (HAFA) closing, nothing in this Demand Statement or in the release of the mortgage shall waive the right to seek a deficiency under the loan documents or any of its other rights thereunder, and the obligations evidenced by the note shall remain in full force and effect until paid in full“. Houston, we have a problem!
I spoke with a Phoenix short sale agent about this the other day, and she told me that an executive at Wells Fargo told her that this policy was put into effect to “protect Wells Fargo, should Freddie Mac ever decide to change their policies regarding deficiency language in their approval letters”. Really? Do they really think we’re that stupid?
We all know that Wells Fargo and the GSE’s have been after each other, with Fannie/Freddie going tit-for-tat on several issues in the mainstream media, but this one crosses the line. You see, this new “policy” (which is in direct conflict with the wishes of Freddie Mac), not only hurts homeowners, but also the taxpayers that are now funding (and own) GSE’s Fannie Mae and Freddie Mac. Basically, Wells Fargo is going out of their way to force homeowners into foreclosure, especially in those states that offer deficiency protection (such as AZ, which has the AZ Anti-Deficiency Statute). You see, in AZ, short sales are not protected from future deficiency issues (unless specifically stated in the approval letter). In the case of foreclosure, in most cases, homeowners receive this protection. So, if a Phoenix short sale client receives an approval letter with this language in it, they will have no other choice than to allow their home to go to foreclosure. At the end of the day, a homeowner who is trying to “do the right thing”, and not simply walk away from their mortgage, is now getting screwed, big-time!
When all is said and done, Wells Fargo will once again end up with egg on their face from this latest fiasco. Being a banking customer of Wells Fargo with 8-10 different checking/savings accounts with them, I will be moving my business elsewhere this week. Their behavior is egregious, and hopefully others will agree and choose to do business with a different bank.
For those that are interested, I have included copies of the Fannie Mae Policy (2012-5), a copy of a recently obtained Wells Fargo Phoenix short sale approval letter, and correspondence from a Wells Fargo negotiator, specifically stating that “Freddie Mac retains the rights for deficiency” (even though Freddie’s policy specifically instructs servicers to NOT include this language). Simply click on the following link…
So, now what? I plan on spending a good portion of my day sending this blog post, along with the documentation, to anyone that will listen. This includes our executive level contacts at Wells Fargo, Freddie Mac, the House Financial Services Committee, the local press, etc. Anyone that will listen.
Wells Fargo has made a decision to blatantly disregard Freddie Mac’s policy of not retaining deficiency rights in their short sale approval letters, and make up their own rules. In doing so, they stand to hurt not only distressed homeowners, but the American Taxpayers as well. This “pissing match” between Wells Fargo and Freddie Mac needs to stop, and it needs to stop today!
Please do your part and forward this blog to anyone that can help with this cause.
Until next time…