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Slade Smith's Blog

Occupy Protester Almost Makes Bank CEO Look Sympathetic
by Slade Smith | 2012/02/28 |

I saw a story that Occupy protesters were picketing outside the home of the CEO of Wells Fargo today.  Little did I know that after I read the story, I'd actually almost think that the CEO ought to be picketing one of the protesters!

Slade Smith's Blog ::

What caught my eye was the fact that the protester interviewed for a story in the San Francisco Business Times was protesting because she had been foreclosed on her second home:

San Leandro residents Donna and Nuno Vieira and their 7-year-old son Leonardo each carried a placard discussing an element of their story about losing a second home in Reno, Nev., through a Wells Fargo foreclosure.
Donna Vieira says a fraudulent appraisal meant her Reno house was $243,000 under water on the day she took out her Wells Fargo mortgage. The Vieira family later lost the home to foreclosure after pouring $350,000 into a down payment and monthly mortgage payments.

That sounded like an awful lot of coin for a typical 99 percenter to plunk down for a second home!  So I was intrigued by the fact that someone who was apparently living the lifestyle of a rich person just a few years ago was picketing amongst the Occupy protesters.

After researching the matter, I found a writeup on the Vieira's story, entitled Profiles: Family Won't Give Up.  I found out that this was a purchase mortgage-- the Vieiras are claiming they bought a home for $243,000 more than it was worth, and blame a fraudulent appraisal by the bank who made their mortgage, instead of blaming themselves for overpaying.

The thing is, when the bank gets an appraisal, that's for the benefit of the bank-- to make sure that the value of the collateral covers the amount of money they are lending. It's the bank that is damaged by an inflated appraisal-- if the borrower defaults, as happened in this case, the collateral is not worth as much as it was purported to be, and the bank will have a larger writeoff.  The borrower saw the property and knew what the price was.  If they had paid cash, there wouldn't have been a bank appraisal.

Should they have known all this?  Well, there's the fact that the Vieiras were appraisers themselves, owning a "successful real estate appraisal business"!  I find it hard to believe that the Vieiras were ignorant of the fact that some appraisers would work with the numbers to ensure that an appraisal would conform to a desired purchase price. 

But anyway, the Vieiras stopped paying on their mortgage-- not for any financial hardship or inability to pay, but because the appraisal was allegedly inflated:

"Knowing the mortgage was fraudulent, we just couldn't keep on paying," Nuno said, adding that they stopped making mortgage payments in September of 2009.

This is what a classic strategic default looks like:

"Despite the foreclosure, both of us still maintain near perfect credit scores," Vieira said, "but due to something that is completely not our fault, we can't take advantage of the low mortgage rates now and switch to a 30-year fixed. It just creates so much uncertainty in our life."

They can still send their son to private school-- bet that isn't cheap!

They send Leo — a first-grader with a fourth-grade reading ability — to a private school, despite the good public schools in the area. "We can't send Leo [to the public school], because I don't have the time to help him with his homework or to track his progress in school," she said.

And why doesn't she have time for her son, you ask?

Now Vieira spends an average of five hours a day, seven days a week, in a legal fight with Wells Fargo over the mortgage fraud issue.

If the Vieiras' story were presented in a story to highlight strategic default and contrast it with foreclosure out of true hardship, it would not be that remarkable.  But that is not the case.  The site on which the article appears is entitled "What went wrong: The Betrayal of the American Dream".  The article that tells their story is presented as a profile of "those hardest hit by the foreclosure crisis".  This is being presented as if I am supposed to feel sorry for the Vieiras!

If folks strategic default, that is their decision-- I wish that people would feel a strong obligation to pay their debts if they can reasonably do so, but if the law allows for it, and it is to their advantage, I can't say that I blame a person for a strategic default.  The banks screwed up badly during the housing bubble-- including in their appraisal process-- and I see strategic defaults as chickens coming home to roost in a sense.  But when someone overpays for a second home, strategically defaults on their mortgage, and then not only has the audacity to blame the bank for the fact that they can't refinance because of a mark on their credit report, but makes a full time job out of pursuing the bank over a loss that they have already stuck the bank with, I end up almost feeling sorry for the bank CEO.  Almost. 



1132 words | 5560 views | 5 comments | log in or register to post a comment

Are you sure this isn't an episode on South Park??
Possibly the funniest thing I've read all day.  Personally I think the CEO should reimburse them for their loss out of his own pocket; then put them up in a 4 star hotel, while he personally oversees extensive renovations to their second home.  That would be the fair thing to do.  He should also undoubtably provide poor Leo with a nanny, since his mother is unavailable most of time (not that that's such a bad this for the child either).    What a hoot.   
by Leigh Attridge | 2012/02/28 | log in or register to post a reply

That is what I need...

I wish they were in Ohio... I would love to have a bunch of clients like the Vieras - more money than common sense!  Of course, I wouldn't be able to win their case, but with the money I'd earn from them I could take on a few pro bono foreclosure cases for homeowners who really deserve and need help.

I'm not sure what the law is Nevada, but I hope they allow for deficiency judgments and I hope Wells Fargo gets a big one!!


by Robert Franco | 2012/02/28 | log in or register to post a reply

I've looked further into the case.
It looks like the Vieiras at least found a ruling in a case in another state (Arizona) that supports their view somewhat.  I just posted a second blog on it.  Also, I learned that the Vieira case has fairly recently been decided, at the Nevada Supreme Court level, no less, and they lost.   
by Slade Smith | 2012/02/29 | log in or register to post a reply

The Myth of the OWS

Just a thought, the banks are COUNTING on you to feel sympathic to the banks not the defaulters, regardless of WHY they defaulted.

While they make BILLIONS off of corrupt banking proceedures, domestically and internantionally, using your "credit" as real money.  They HOPE AND PRAY every day, that people underwater on their mortgages will continue to pay those worthless mortgages, because YOU took the hit, not them.

The current mortgage system has failed and is on it's last legs.  Why do you think the Feds have ramped up HAMP (which failed miserably before), have increased the CSR calls to borrowers for Mortgage Modifications that they will NEVER be able to qualify for, etc.

Interest rates are at an all time LOW - but houses are not selling?  WHY??  Because no one can qualify for loans if they don't have jobs/income and if they do buy now, they are buying real estate that will CONTINUE TO DECLINE in value (ie: Buy it today, be underwater tomorrow).

We need a TOTAL collapse of the system so that we can start all over again.  Perhaps next time the money lenders will be prohibited from securitization and slicing and dicing a mortgage into multiple pieces that are over-inflated and sold off to multiple investors for 10-100 times its REAL value.

The creation of money out of thin air needs to stop. 

As for the article - regardless or not of whether this was a 1st or 2nd home, the same principles apply.  And, if YOU worked hard to create a successful business, that allowed you to own a second home and live a better lifestyle,  why is that a terrible thing?  Isn't THAT the American DREAM??

Ok, these people are not the grandma on the street because of the evil bank, but they are still affected by the evil bank practices, regardless, no?

Finally, if you go to an OWS rally/protest, you will find people from ALL walks of life, not just 20-somethings out of work, as portrayed by the MSM spinners.

I happen to be part of the 52%.  Yanno, the hard-working guy who gets to pay for the other 47% who taking all the "free" "entitlements" from hard-working taxpayers compliments of the U.S. Government.

I do not begrudge the  Vieira's their situation.  I am guessing that at the time, the bank convinced them that by using the bank appraisal, they would qualify for the loan b/c there would be "built in" equity, by the over-inflated appraisal.  People are stupid, so they probably agreed at the time, never thinking it would come back to bite them in the arse.  But it did.

I know of one situation where a property was being "sold" for $595K but bank appraised for $730,000.00  The bank loan was $610,000.00, just enough to cover all the closing costs for the borrower and their "down payment" was 12 months worth of rent the seller had collected from the buyers when they were renters. 

The buyers actually walked out of closing with $1800.00 in their pockets and automatic "Equity" of $120K based on the LTV.  Of course, when the SHTF, the property devalued to less than $595K and probably is still sinking and is "underwater". 

So there you have it, it's not an unusual situation and everyone in this business knows how the game was played until the real estate "crash".

25% of ALL mortgages held today are underwater.  You certainly cannot place all blame on the BORROWERS for that, can you? 

Welcome to reality.

Ok, off my soap box for the time being.

by Victoria Moate | 2012/03/11 | log in or register to post a reply

A righteous rant, Victoria!

I'm glad you took the time to get on your soapbox.  I don't agree with most of what you have to say, however. 

Let me remind you that the Vieiras themselves were appraisers.  You say, "everyone in this businesss knew how the game was played."  I think it's fair to assume that the Vieiras also knew how the game was played.  They played the game, and lost. 

The Vieiras could still have their second home-- they could have simply continued to make their payments.  Remember, they quit making their payments because their mortgage was supposedly "fraudulent", not because they couldn't pay.  So I guess they didn't want the "American Dream" in terms of having a second home they could enjoy... what they wanted was for the value of an investment to appreciate. 

Judging from the Vieira's perfect credit and their ability to pay for private schooling for their son, they have the finances to live the American Dream.   But they want to wallow in victimhood and be miserable instead-- as a choice!   Instead of enjoying her son, Mrs. Vieira is choosing this obsessive quest to pin full blame on the bank for a bad investment she willingly made.    Instead of enjoying their lives, the Vieiras want to make sure the bank CEO is as miserable as they are.

They need an attitude adjustment! 

I believe you are misreading the housing market.  Like the people who missed the signs of trouble at the top and got caught surprised by the turn for the worse,  I think you are missing the turn for the better that is occurring now. It is very unlikely that the housing market will continue to decline for long in an otherwise growing economy that is producing jobs, as it has been for several months now.  Housing is already very affordable right now in many markets.  If homebuyers to not step up right away because they are afraid that prices will fall further, or because they can't qualify for a loan, investors will buy and put the homes up for rent.

I strongly disagree that we need a total collapse of the system.  We saw what a near total collapse looked like, and it involved millions of people losing their jobs and their homes.  Why do we need more of that?  Maybe every lesson has not been learned-- they never are, and even when they are learned, they are forgotten-- but I think some lessons have been learned.  Now what we need is a nice recovery!

by Slade Smith | 2012/03/11 | log in or register to post a reply
Slade Smith's Blog

I'm the web developer for Source of Title.  Due to this role, I have become an interested observer of the title insurance industry and the broader issues arising out of real estate and finance.   I have also blogged extensively about politics under the pseudonym "skymutt" at the partisan Democratic blog Daily Kos and the non-partisan community Swords Crossed






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