I don’t like Wells Fargo Bank. Its abusive policies make it impossible to think well of it.

I try not to do loan modifications for clients because all banks are reluctant to negotiate them. Banks are forced to do so by well-meaning statutes. Evidence of the banks’ dislike is widespread: just open the newspaper to find stories about banks requesting the same documentation time after time, and failing to respond to queries from borrowers.

In my experience, however, Wells Fargo takes this passive-aggressive approach to loan modification to a new, diabolical level.

My client had filed a Chapter 7 bankruptcy and still had a Notice of Federal Tax Lien in the amount of $100,000 on his property. He was paying off the IRS through an installment agreement. Wells Fargo Bank had approved his HAMP (Home Affordable Modification Program) modification, with the exception of one item: it needed a lien subordination from the IRS.

A lien subordination allows a lender to create a new loan and get it secured in a better position than an existing lien. If Wells Fargo modifies its loans by creating an entirely new mortgage, this makes sense: without the lien subordination, its new mortgage would have to get out of its place in line in front of the IRS, and step behind the IRS. The lien subordination is kind of like me allowing someone in front of me in a campout line for Grateful Dead tickets to let his sister hold his spot in line.

The borrower hired me because I know the bureaucracy at the IRS, and if anyone could get a lien subordination, it was me. I dutifully made contact with the IRS, and got a reasonable answer: ‘we don’t issue a lien subordination until we can see the new mortgage that we are subordinating to. In the meantime, here is the revenue procedure that says that yes, we will subordinate to any appropriate lien.’ The IRS lien technician said he had never heard of any other bank than Wells Fargo requesting a lien subordination without providing evidence of the new mortgage; he said that one reason to not subordinate is that most HAMP modifications don’t even require a new mortgage, thus the lien subordination is a useless piece of paper. In this case, even the IRS tries to avoid creating useless pieces of paper.

I called back to Wells Fargo Bank: do you guys need the lien subordination in these circumstances? Are you modifying by creating a new mortgage, or merely modifying the current loan? If you are creating a new mortgage, can you generate the documentation on that loan so we can get the lien subordination? Finally, if you really need the lien subordination from the IRS, and it’s clear that they won’t issue it, will you just admit that you won’t do a loan modification when the borrower has a notice of federal tax lien, because you’re requesting a document that published guidance says will never be issued and letting people know this will save a lot of effort and time?

I still get mad thinking about how I tried to get a useable response from Wells Fargo. We had numbers for a loan settlement officer and two levels of supervisors above her. These people were very unresponsive; they failed to return dozens of phone calls over the course of about three months. At one point, the borrower’s case went to a special technician. That guy was fairly responsive, but could not answer our questions either.

The case ended with my client’s property getting foreclosed, and no acknowledgement that Wells Fargo asked us to do the impossible, nor answers to the questions posed above. It still galls me, and it certainly hurts my opinion of Wells Fargo Bank.

September 22, 2014

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