Today I got to speak with Larry and Sean at Wells Fargo. This was my second day of three way calls with my client on the line, trying to get somewhere in an attempt to “Do the right thing” and save Wells Fargo $20,000, or more.
Jenny & Jim bought their home about 10 years ago. Today the home is still worth about what they paid for it. Unfortunately, or fortunately 10 years is a long time and things have changed in their lives. First they have had two children and have outgrown their 2 bedroom, 1 bath home, with only 866sf. Secondly Jim, now works part time up in Paso Robles, which isn’t exactly within commuting distance of Long Beach.
Their desire would be to live in Paso Robles. Fortunately their parents have a very small home on 5 acres, which they can live in, rent free, with a work shop for Jim’s business. It’s just about a perfect scenario, except one thing. They are going to be about $20,000 deficient if they sell their home. It is hard to say the exact sales price of their home, but the net proceeds should be around $20,000 less than the loans on the property.
The standard way to sell a property when the loans are in excess of the net proceeds is to do a “Short Sale”, where the home is sold and the lender accepts an amount “Short” of the entire balance on the loan. In Jim & Jenny’s instance, there is a first trust deed of $260,000 which will be paid off. However, in addition, they have a 2nd trust deed, line of credit, in the amount of around $60,000. If the net proceeds of the home are around $300,000, and if Wells Fargo decides to accept a short pay, then Wells Fargo agrees to accept $40,000 in lieu of the outstanding balance of $60,000 on the 2nd trust deed, leaving the bank with a loss of $20,000.
The benefit of a short sale to Jim & Jenny is that they get the home sold and can move, but they are left with a blemish on their credit, which will likely keep them from buying a home for 2-3 years. They figure that if they live rent free, then they could easily take a personal note for the $20,000 deficiency and pay off the amount in less than one year, and be ready to buy their own home up in Paso Robles. Now any rational person would figure, “If Wells Fargo has a process to let me stick it to them for a loss of $20,000, then certainly they should have a process allow me to NOT stick it to them, and move the $20,000 deficiency from a home line of credit to a personal loan, so that I can move, and they can get paid”. You would figure.
I spoke with my lender at Wells Fargo, a very smart seasoned loan agent that knows her stuff and originated the loans. She confirmed that she thought this was possible, but not being in the “Loss Mitigations” department her experience was very limited. So where to start. How about with the telephone number on the loan payment coupon. Jenny & I got on the phone and started dialing. The person on the other end, understood what we needed to do and routed us to somebody that could allegedly help. A Wells Fargo Premiere Banker will be able to help you with a Personal Line of Credit. I had to explain to this nice young man, Ryan, a Premier Wells Fargo Banker, that I don’t think that they would approve my client for $20,000 or possibly $30,000 of additional debt in the form of a personal line of credit. My clients income had dropped since they qualified and they had no equity in their home. I explained to Ryan that we did not want to borrow MORE money on top of the home loans, but that this loan was to only be given if the home was sold and the loans were paid off. This small loan was in place of the two home loans.
He assured me that if I were to explain why my clients needed the money, then maybe it might work. I asked him where my clients might get this type of loan application, and he informed me that we would find the application for a personal line of credit at www.wellsfargo.com. Right there I knew we were dead in the water. He didn’t understand the situation even though I kept repeating myself. “We don’t want to borrow money, we only want to get a personal loan for around $20,000, only if and when both home loans are paid off.”
So on day two I thought I would call my seasoned veteran Wells Fargo loan agent. I explained my series of calls and that after 45 minutes I was routed to www.wellsfargo.com. “Those people are idiots” was her response. Yes I agreed, that it didn’t seem like they had a clue about what we were asking for even though I got a lot of yeses on the other end. She explained that getting a $20,000 or $30,000 personal line of credit was very difficult, and although it made us feel somehow special to be connected to the Premiere Banking Division, that ultimately it would do no good. Our lender looked through her list of number. “Let’s see, people already delinquent on their loan?” no not that one. “People current on their loan, but afraid that they will not be able to continue making payments?”. That seemed like the right number.
So Jenny & I continued on our quest and kept dialing. We reached Larry, he said he understood what we were trying to do and would route us to the short pay department. Now at the Short Pay Department, I explained to our new friend Sean, our client’s need to move, and sought cooperation from Wells Fargo to make this happen. I stated that it would certainly be preferential for Wells Fargo and my client to depart ways with Wells Fargo getting paid back all of their money, and my clients credit in tack, rather than my client sticking it to Wells Fargo with a loss of $20,000 or more. He agreed but stated that they did not have any program set up to accommodate Jenny & Jim.
This is where I got a little facetious and possibly a little insulting. “You mean that Wells Fargo would rather have us screw them for a loss of $20,000 or more, rather than make them whole. Now Sean don’t take this personally, I am just trying to help your company.” Sean explained that he was not aware of a process that would allow us to convert this $20,000 loss for Wells Fargo into a personal loan that could travel with Jim Jenny to Paso Robles.
Again being a little critical to help gains his assistance and get Sean to think out of the box I stated. “With a company as large as Wells Fargo, I am sure that we are not the only people to have this need, and there should be some system in place to handle this type of situation”. Sean stated that he was not aware. Ok, I would have to step up the rhetoric. “You know if I were the President of Wells Fargo, and overheard this conversation, of a client trying to figure out how to save Wells Fargo $20,000, rather than go down the path of a short sale and sticking Wells with a $20,000 loss, and the Short Sale department told the client that it couldn’t be done. I would fire everybody in the department, there has to be a way make this happen.”
Sean happily explained that in California, there was no deficiency judgment allowed on the $20,000, and that Jim & Jenny would have no negative obligation other than the bad credit. I again pleaded to his common sense with a further outrageous comment “If President Obama overheard our conversation right now he would be very upset, because he, and all of us tax payers are helping to fund insolvent banks.”
“Again Sean don’t take this personally, I am just trying to help Wells Fargo not to take a loss.” after about 15 minutes of pleas, Sean said, well maybe we can speak to the Liquidations Department. He transferred us over there unfortunately they were closed for the day. So Jenny & I agreed to get back on the phone tomorrow and see what headway we could make.
I think Jenny was quite surprised that it was so difficult to try to do the right thing. The only answer I had for Jenny was the common reframe, that is why they say common sense, is not very common.