Wells Fargo locked its San Francisco headquarters branch at noon Thursday when Richmond Mayor Gayle McLaughlin and fellow protesters arrived to speak with CEO John Stumpf over the bank’s lawsuit fighting the California city’s plans to use eminent domain to seize underwater mortgages.
Wells Fargo filed suit last week against Richmond in its role as a bond trustee, representing investors holding the securities backed by the Richmond mortgages. The bank argues that Richmond’s plan to use eminent domain in this fashion is unconstitutional.
As McLaughlin stood before Wells Fargo’s locked doors today, she captured the frustration many feel today about the foreclosure crisis that persists even as San Francisco and other markets see a recovery in home prices.
“Nothing has been done for the last five years or more. A fix is needed,” she said. When a reporter asked whether the former school teacher, who was elected in 2006 [running as a Green], ever thought she’d be taking on Wells Fargo, McLaughlin responded, “I feel right at home here with my community. I’m committed to taking a stand.”
She also said that almost 70 percent of Richmond residents are members of minority groups that were targeted with so-called predatory loans.
Attending today’s protest was Richmond homeowner Leonard Desmuke, who is current on his underwater mortgage but hopes to benefit from Richmond’s plans to buy mortgages like his for less than today’s face value of the underlying property. The city and its financial partner, San Francisco-based Mortgage Resolution Partners, would then refinance the loan at a much lower principal amount.
The longshoreman said he’s current on his $3,500 monthly mortgage, a payment that escalates at the end of the year.
Last month’s New York Times coverageof Richmond’s plans painted a stark picture of Richmond’s housing market. The story featured Richmond couple Robert and Patricia Castillo, who paid $420,000 for their three-bedroom home in 2005. Today, they estimate the home is worth just $125,000.
In covering the banking industry, I have found that large banks appear eager to sidestep initiatives to address the foreclosure crisis at the local level, where they don’t have the power and influence they enjoy at the federal level.
What is clear, from what I hear from customers pursuing mortgage modifications, is that the foreclosure crisis is far from over. I hear from disgruntled customers who say the nation’s largest banks are in disarray when it comes to handling mortgage modifications, often with one arm of the bank not knowing what’s occurring at another area of the same institution.
Even at Wells Fargo’s (NYSE: WFC) annual shareholder meeting in Salt Lake City in April, Stumpf bragged that the bank has waived more mortgage principal than any other company in America.
But later in the meeting’s shareholder Q&A period, a representative working with troubled borrowers on modifications said things look very different from where he sits. He said Wells is the most difficult bank to work with in pursuing loan modifications.
Thursday, the Richmond mayor said she had a message for the banks.
“We’re trying to take these troubled mortgages off your hands. Let us help you,” McLaughlin said.
The stakes are high as other cities, including Seattle, North Las Vegas, Nev. and Newark, N.J. are said to be following Richmond’s eminent domain efforts to see whether they succeed in preventing foreclosures.
As luck would have it, shortly after the mayor left, Wells Fargo executive Lisa Stevens walked past the bank’s headquarters with security guard in tow.
I asked her why Wells Fargo locked out the mayor of Richmond. Here’s the exchange with the regional president of Wells Fargo’s West Coast operations.
She smiled and asked, “Mark, how are you doing?”
I said, “Fine thank you, but my question is one that our readers will be asking?”
“You’ll have to speak with Mike Billeci,” she said, referring me to the San Francisco market president.
Later Wells Fargo shared the following statement with me.
“In order to protect the safety of our customers and team members, we take the precaution to lock the doors to our stores during protests,” the bank said. “Wells Fargo representatives routinely meet with local elected officials, and have met with Mayor McLaughlin in the past regarding community concerns; representatives are open to doing so again in the future.
“Wells Fargo, in its role as either servicer or as trustee, does not have the contractual authority to sell the loans that the city of Richmond has sought to purchase and believes the threatened use of the power of eminent domain to acquire the loans raises significant and troubling constitutional and other issues,” the bank said.
“Wells Fargo’s commitment to responsible lending and our work to help customers facing payment challenges, has resulted in a foreclosure rate of less than 1 percent of owner‐occupied loans in our servicing portfolio over the past year,” the bank said. “Wells Fargo has helped more than 870,000 customers with loan modifications and has extended more than $7 billion in principal forgiveness since January 2009.”
Editor’s note: Wells Fargo’s lockout of the Richmond mayor drew a strong response from readers. Some of that reaction, from people on both sides of the issue, was published the following day.