I would love for this to be a work of satire. Unfortunately, that’s just not the case.
A few days ago, there had been an article about Wells Fargo suing itself, in what seems to be a classic case of the right hand not knowing what the left hand was doing. To be fair, Wells Fargo is not the only bank to be doing this.
This is a leftover from the days of zero-down and subprime mortgages. When mortgage brokers offered such items, they frequently did so by dividing up the mortgage into an 80/20 (also known as a piggyback loan), meaning that one bank would be sold a mortgage which covered 80% of the total cost while another bank was sold a mortgage which covered 20%. For those without money for a down payment, this seemed like an excellent deal because they were still getting 100% financing. It also allowed people to sidestep the PMI because the mortgage was financed in full. The catch was that the interest rates for this type of mortgage tend to be high. Though there is often room to haggle with the first mortgage but as the owner of second mortgage has little room for profit, this second mortgage is often at an ever higher rate. I’ve seen some 20% mortgages which were adjustable as well.
As we have seen happen, many homes bought with these 80/20 mortgages ended up in foreclosure and it is not uncommon to find agencies which no longer even offer the 80/20. When two banks own mortgages for the purchase price of a home which goes into foreclosure, usually the owner of the first mortgage will sue the other lien holders in order to get a clear title and offer the property in a sale.
So, when one bank ends up owning both mortgages…..? Well, in the case of Wells Fargo, you get a plaintiff which is Wells Fargo Bank NA and a defendant which is Wells Fargo Bank NA.
Yep, in what I consider a bold move of unparalleled legal precedent, banks are suing themselves to get it all straightened out in court.
Whereas I would hope anyone reading this article would assume that it might be easier to just relinquish one lien onto yourself, these banks have decided that they would rather pay court costs and two sets of attorneys fees to accomplish the exact same thing. I can’t help but wonder if they would file an appeal as well.
The truly tragic part of this story is that these are taxpayer-subsidized institutions who have no problems squandering away our money on attorneys fees and court costs because they can’t get their acts together and work with themselves.
