Could it be that the best chance to save a young family from foreclosure is a 28-year-old Pakistani American playwright/attorney who learned bankruptcy law on the internet?
I was late when I first met my clients, the Lipkin family, outside my office. I was very late. I couldn't believe I was late. I felt like an imposter. Maybe I was an imposter. I had dressed as professionally as I could: a sophisticated sports jacket, slicked-back gelled hair, elegant briefcase. My straightened posture exuded the charismatic confidence of a seasoned attorney. In my mind, at least.
I extended a hand and introduced myself to a family that was about to have their home foreclosed upon. Carl and Natalie, the husband and wife (I've changed their names), were both in their early thirties. Their three young daughters were with them, wilting in the heat of the parking lot. They met me with open smiles, even though they had just driven ninety minutes from Sacramento on a scorching summer day. I invited them in.
I was hoping they would never guess that despite being a licensed attorney two years out of law school, I was utterly paralyzed with fear--and earnestly praying to Allah that my potential clients were not about to call me out as an incompetent charlatan, punch me in the face, storm out of the office, and call the state bar seeking to disqualify me.
I was the guy who was going to save these people from being evicted from their own home? Who was I kidding?
In reality, "my law office" was actually my friend's office, which he'd lent to me so that I could meet these clients. The classy jacket had been purchased at a clearance sale in an outlet store at the Great Mall in Milpitas. The gel was the last remnant of a decaying and potentially expired bottle I'd probably had since college but never found the opportunity to use. The suitcase was a gift from my relatives in Pakistan--who, much like the rest of my family, were thoroughly shocked that I had passed the bar exam and become a licensed attorney. My business cards had been printed for free by Vistaprint, and despite having a professional front side featuring my name in bold letters and the words ATTORNEY AT LAW, the back side glared BUSINESS CARDS ARE FREE AT WWW.VISTAPRINT.COM!
Game over. I was doomed.
- - - -
It wasn't supposed to be this way. In 2007 I graduated from UC Davis School of Law, a reputable institution that ranks in the top forty of the inexplicably influential U.S. News &World Report annual school ranking. According to my Property professor, students who graduate from top-forty law schools are bred to "find a comfortable desk job, most likely in a corporation, and make a nice income without really having to get their hands dirty." The old saying goes that the A students become the professors, the B students find jobs in government or corporate law, and the C students end up making all the money.
But given the economy, this conventional wisdom was out the window. Instead of being employed at all, like thousands of others who were unlucky enough to graduate law school in 2007, I ended up in my old bedroom, sharing the family home with my parents and my grandmother.
Despite being thoroughly emasculating for a twenty-eight-year-old, living at home certainly has its benefits. You never have to cook, given that your mother, a culinary Jedi Knight, makes fresh Pakistani food every night. You avoid doing the laundry and the dishes, because your father has a "specific system" that only he has mastered. Also, you have your own personal "prayer factory" in the form of a very pious grandmother, who constantly sends duaas and blessings your way--and reminds you nonstop that the only reason she's still living is to see you married and with kids. And for a solo attorney without any money, home can also serve as a convenient and rent-free law office.
After passing the bar, I immediately started scouring the internet for any job even tangentially related to law. I applied for legal-secretary positions, legal-assistant jobs designed for nineteen-year-old college students, unpaid internships at shady start-ups, even senior legal-counsel positions at corporations requiring a minimum of ten years' experience. I shamelessly claimed, as one of my qualifications, "worldly wisdom that compensates for lack of actual legal experience." I was denied by every recruiting center.
Dejected, I lapsed into my innate South Asian melodrama. I made the following declarations: "My life is shameful. I'm a grown-ass man, thoroughly qualified, who just got denied a menial job at a small law firm. If I was a samurai in feudal Japan, I would have to harakiri myself out of dishonor and shame."
"Well, you're no samurai," replied my mother, "and you're not in feudal Japan. You're Pakistani and you're living at home. So be quiet, eat your daal and naan, and afterward go get some hara dhaniya, pyaaz, tamatar, and Lactaid milk from Food 4 Less." My mother is the world's second-bluntest instrument, preceded only by my father.
Tired of being rejected, I decided to venture forth and learn the law on my own. It didn't take a genius to figure out we were heading toward a full-blown recession; a South Asian attorney, who'd cornered the niche market of "the Pakistani American attorney" years ago, told me to learn how to file Chapter 7 and Chapter 13 bankruptcies, which were the bread and butter of solo attorneys trying to survive. And so off I went to Google.
I typed in "Chapter 7 and Chapter 13 bankruptcy guides" and found the trusted and respected Nolo legal guides for less than thirty dollars apiece. These guides are manna from heaven for aspiring attorneys; they ostensibly teach the layman all the fundamentals of how to "do it yourself " so you won't have to spend money on people like me, but it turns out they're just as useful to law school graduates living with their parents.
I devoured every bankruptcy book I could find, and then turned to my associate legal counsel, Google, for more (free) information on bankruptcy law. Somewhere along the way I read an article predicting a rise in foreclosures due to the disastrous economy, and realized the rate of Chapter 13 bankruptcies was going to increase exponentially as people desperately tried to save their homes.
I also discovered that agents and brokers who'd made hundreds of thousands in the once booming but now hemorrhaging "loan refinancing market" had magically transformed into "loan-modification consultants." So the subprime-mortgage brokers who had actively preyed on unsophisticated people by convincing them to sign "too good to be true" loans--which later defaulted, thereby capsizing the housing market--were now demanding more money from these same clients in order to modify their loans and allow them to avoid pending foreclosures.
Despite being equipped with some--some--knowledge, I shared the quintessential trait of all young attorneys: unrelenting, paralyzing fear. It overwhelms everything we do and contaminates the first two to three years of our law jobs. The thought process goes something like this: "I know nothing. How the hell did I get this degree? How the hell did I pass the bar? Law school didn't teach me anything. Do my employers know I'm incompetent? How long can I fake this before they figure it out? Are my peers like this? How come everyone else knows what they're doing? What if I never learn? What happens if I get fired or fail? Will I get disbarred? I bet I'll get disbarred! Damn, I'm getting disbarred! Please, God, don't let me get disbarred."
I had all these thoughts as the Lipkin family sat on my friend's office couch and told me that they were about to lose their home. These people trusted me more than I trusted myself. God help us both.
- - - -
THE LIPKINS: FORECLOSING THE AMERICAN DREAM
Man, if you can keep me from getting foreclosed, I will personally pimp out your pretty ride over there," promised Carl, pointing out the window to a sleek BMW that did not belong to me.
"My car is that broken-down 1997 Camry next to the Beemer," I admitted.
"Get out! A guy like you? A fancy lawyer? You're riding in that? You probably have a sweet cherry hidden in your garage, huh?"
I just nodded my head to satiate his fantasy, knowing full well the only thing in my garage was my comic-book collection from fifth grade.
Carl has been infatuated with cars since childhood. He loves the way they look, the way they feel, the way they move. Miserable as a stockbroker, Carl quit eight years ago and used all his savings to invest in his first business, a luxury-car detailing service.
"He's obsessed with cars," Natalie said. "He wants to make them fast and pretty."
Although not technically married, Carl and Nancy refer to one another as husband and wife, having been together for nearly fifteen years--ever since Natalie was in high school. They're now raising three adorable daughters--two from Carl's previous relationship, and their own eighteen-month-old.
Ironically, Natalie's previous job, before she began managing Carl's two businesses (they expanded three years ago), was as a mortgage processor for a division of Countrywide Financial, the nation's largest independent mortgage lender and a key actor in our current financial mess.
"Mortgage processing was my passion," she said. "Really, my passion. When I worked for Countrywide, it wasn't anything like what we're witnessing now. I was really good at my job. My bosses loved me. I processed twenty to twenty-five loans a month. But right when the mortgage business was hitting its peak, the economy started to slow down, and then everything started falling. They let me go when I had to move."
Despite Natalie losing her job, the move to Sacramento was auspicious for the family--Carl opened a second branch of his detailing shop, and they finally purchased their first home.
"Before this, we were living in the Bay," Natalie said, "Carl had bought a house with his dad and sister. All of us stayed in that house. My family, his sister's family. It was a four-bedroom home. Think about it: two families, four kids, sixteen hundred square feet? We had to buy our own place."
So they did. Moved to Sacramento and into a house that, as we all now know, was far beyond their means. But it's hard to blame them; the economy was booming, and Wells Fargo--not some fly-by-night operation--was offering them incredible terms.
"It felt great to get the home," Natalie said. "Our own home, our own pool. My own master bedroom. My kids finally had their own room instead of sharing it with others. I even had a spare room for once. I was happy. It was starting something new--something completely our own."
Like many Americans suckered by mortgage deals, the Lipkins were given a "stated-income loan" with an "adjustable interest rate." This nifty trick allowed brokers and their agents to encourage borrowers to essentially make up any income for themselves. Carl was given a loan he would be unable to afford on his actual salary.
Adjustable interest rates were initially low, thereby enticing borrowers with a promise of low monthly payments. When asked what would happen if the rate "adjusted" and the payments increased, borrowers like the Lipkins were told, "Oh, don't worry, by that time your property will have significantly appreciated. You can always refinance the loan and take money from the growing equity."
"We just did what the bank said to do," explained Natalie. "Our broker said, 'Here, sign this paper and you'll get the loan.' So we did. We wouldn't have qualified otherwise."
That same broker was the one who referred them to me to save their home from foreclosure.
On the stated-income loan, the bank claimed Carl was making $25,000 a month. In reality, Carl was netting a salary of $26,000--a year.
"But you knew it was a lie, right?" I asked. "So why do it?"
"You're right," Carl admitted. "I mean, I knew I wasn't making that much, but the broker said it would be no problem, that it was what everyone was doing. And they said it was the only way the bank would approve it, so I just trusted him and signed the paper. He said everything would be okay."
"I partially blame ourselves for this," Natalie added. "But then again, I also blame the economy. And I also blame the banks. Ever since we got in trouble, we've been trying to work with them! I want to keep my home. I want to stay in my home. I've tried to keep my home! I want to raise my children in my home."
The courts have held that the onus is on the bank to make at least a reasonable effort to ensure their loans are not oppressive, fraudulent, or liable to default. This is why so many of these "stated-income loans" are in violation of federal and state lending laws, and courts generally find the lenders to be breaching their duty to their clients. Many times, the court rescinds the original contract in its entirety.
But like most homeowners, the Lipkins didn't know the subtleties of the law. They were simply told they could sign a paper and state a mythical income to push the loan documents forward.
In other words, they relied on their broker--in this case, a member of their own Filipino community. In my neck of the woods, it was mostly Vietnamese Americans, South Asians, and Afghan Americans coordinating loans for their fellow minorities--all groups, regardless of race or religion, participated in the fraud. In return, borrowers got a home and a piece of the American dream.
Until the rude awakening.
"In 2008--that's when things went bad," Natalie said. "The market for cars started going down, and almost overnight we lost 50 percent of our income. At the same time, the interest rate adjusted, and we were paying nearly $4,100 a month on our loans."
Their home, meanwhile, which was originally valued at $585,000, had depreciated severely in three scant years. It was now essentially worthless at $270,000.
"We didn't know what to do," Natalie said. "We couldn't make the payments. The banks would call us all the time, asking 'Have you been able to make your payments? Why not? When will you make the payments?' We wanted to keep our home! We really tried to do everything. But the banks, oh my goodness, you get the runaround!"
After they realized they couldn't make the payments, Carl and Natalie first tried for a loan told them to try the HOPE for Homeowners program. They applied, and were denied. The bank told the Lipkins they should have done a manual entry for the loan modification through the loss-mitigation department.
"You never get the same person twice," Natalie said. "It's never the same person when you call back. Then someone calculates the numbers wrong. Someone else gets their information wrong. They're not on the ball on their side--that's what makes it so frustrating. I'll fax them something, and I won't know they didn't receive it even though I got an 'okay' from my fax. They don't even bother telling you--ever. So then they close my file, and I start all over again."
That's when they hired their first attorney. On the radio, Natalie heard about a law group that did loan modification. She Googled the law group and didn't find any complaints. They hired them.
"This frickin' guy!" Carl exploded. "I gave him sixty-five hundred dollars! And you know what he did? You know what I got for sixty-five hundred dollars? He foreclosed my home! He did nothing. He wouldn't even return my calls! Not one call!"
By this time, Carl began eyeballing me with suspicion.
"Hey... do you know what you're doing?" he asked. "I mean, are you just going to take our money and do nothing?"
My paranoid and terrified mind went into fight-or-flight mode. I pictured Carl lunging for my jugular, his mind clouded by berserker rage as he imagined me as the attorney who had defrauded him. I scanned my friend's office for a weapon I could use to defend myself, but noticed only a bowl of wasabi peas. I thought perhaps I could quickly fling a pea into his eye, temporarily blinding him, if he took the offensive.
Thankfully, his wife calmed him down, and the pea ended up in my mouth.
Sadly, though, the Lipkins' tale of being thoroughly screwed by unethical attorneys preying on desperate clients is all too common. The State Bar of California has released several "ethics alerts" reminding attorneys of their professional responsibilities and of the appropriate way to deal with clients in default. The Recorder, a legal newspaper, had a cover feature on the most notorious offenders, who bilked clients out of millions and did nothing as their homes went into default, were foreclosed, and then sold on the steps of their local courthouse.
If you recall, young attorneys are some of the most terrified, neurotic specimens on Earth--paralyzed by the fear of being disbarred at a moment's notice for their rank incompetence. Anticipating such severe penalties, I had read every single ethics alert, researched the California Civil Code, talked to seasoned attorneys, and called the State Bar Ethics Hotline three times, asking them every hypothetical question I could imagine. After the third call, the patient research assistant said, "I think you can relax."
And so I exhaled, looked Carl in the eye, and in my most professional "adult voice" launched my rehearsed--but very sincere--spiel, which I reiterated at least twelve times throughout the one-hour-forty-five-minute interview.
I assured him that I was not a sleazy attorney solely after their money. That I was not corrupt or unethical. I told him I wanted my name to mean something. Ethically, I could not guarantee them results. No attorney, I said, can guarantee a result--that would be against the California Rules of Professional Conduct. But I assured them that I would try my utmost--that I would fight to save their home. I was not a scrooge, I told them; you can see how affordable my rate is for this service. I am not just after your money. I want to help you and your family keep your home. Okay?
There was a lengthy pause.
"Okay, I believe you," replied Carl, after that uncomfortable eternity. "I'm sorry about earlier. I just, you know, it's stressful. But let's get started. You want the check now? Do I need to sign an agreement?"
Whenever a client signs an attorney client retainer agreement and hands a young attorney a check, it always feels like the first time a pretty girl told you that you were actually not hideous. It shocks the senses. It is absolutely awesome and unbelievable.
We were officially in the business of saving the Lipkins' home. They brought over all their financial information, their pay stubs and monthly mortgage statements, but they were missing key loan documents and tax returns reflecting the fraudulent stated income. The foreclosure was scheduled for Friday. It was now Tuesday, 5:46 p.m. I had two days to prepare a legal-demand letter, review their finances, guide them in writing a hardship letter, create a loan-modification package, and get them to a paralegal who would prepare an emergency bankruptcy petition just in case the bank didn't flinch.
A family about to lose their home. A legitimate check in my hand. Actual clients who had voluntarily agreed to let me represent them. And a trustee sale in two days.
I closed my eyes. I said a prayer. I exhaled. I opened my eyes.
And in front of me there stood a shit-covered bear waiting to wrestle. This was what a battle with a billion-dollar bank would be: a fight with a creature far bigger than I, and covered in feces.
- - - -
"ON MY SIGNAL, UNLEASH HELL!":
THE FIRST DAY OF BATTLE
From the pompous bravado exhibited by most young hotshot attorneys, the layman might assume that we go to sleep at night having orgasms thinking about our awesomeness. The brutal reality is that most of us bathe ourselves in ulcer-inducing anxiety as we curl up under our blankets, staring at the ceiling.
It was Wednesday morning, and I had two days to save a family from losing their home. There was no Rocky music playing in the background, no self-assuring voice of confidence, no verbal fellatio--nothing. There was only the overwhelming sense of dread.
Dealing with the banks to suspend your foreclosure date and secure a proper loan modification is akin to repeatedly ramming your head into a brick wall in the hopes that it will eventually break. Before coming to me in utter desperation, the Lipkins, like so many Americans, tried in vain to negotiate with their bank directly. They were told that a "negotiator" had been assigned to their file and was "reviewing it." Trying to reach this mythical negotiator by phone proved more difficult than finding Bigfoot. On call after call, the Lipkins were told that the negotiator would be in touch by July 21--the date, coincidentally, of their foreclosure sale.
I informed the Lipkins that the bank was simply using a delay tactic: no negotiator was assigned, and no one would ever call. They were flabbergasted that Wells Fargo would lie to them.
But Wells Fargo is a real piece of work. The Obama administration recently blasted the bank by name as being one of the major lenders lagging behind on their promise to help homeowners keep their properties. After receiving billions of dollars from the government to help struggling homeowners, Wells Fargo turned around and offered loan modifications to a whopping 6 percent of their borrowers.
At least the executives of the bank were enjoying the fruits of foreclosure. The L.A. Times broke the news that one of Wells Fargo's senior vice presidents responsible for overseeing foreclosed commercial properties kept a swanky $12 million foreclosed Malibu home off the market so that he could use it as a weekend getaway. The previous owners, who lost their fortune to Bernie Madoff, saw their family home turned into a beach-party house. Wells Fargo fired the vice president and issued a public apology. But the Lipkins, like so many families in America, were denied the courtesy of a phone call.
My law degree and license to practice, however, gave me considerable leverage. Banks rarely deal with customers in a straightforward manner, but their ears do perk up when an attorney threatens a lawsuit or an emergency bankruptcy filing.
In order to get anywhere, you first have to make a call to the bank. And because there is no special direct line for lawyers threatening lawsuits--that would make it too easy--this means dialing the customer-service number. "Thank you for calling customer service. We appreciate your business. Due to unexpectedly heavy call volume, we are experiencing a delay. Please stay on the line and a customer-service representative will assist you shortly."
After thirty-five minutes of elevator music a human voice came on the line and asked me about my business. I mentioned "loss-mitigation department" and was transferred. I waited for another ten minutes. A robotic voice calmly asked me to enter the loan number and press pound.
Upon arriving at the desired destination and hearing the first sign of sentient human life on the other side, I started in. "Good morning, my name is Wajahat Ali, from the Law Office of Wajahat Ali, authorized representative of Carl Lipkin. I would like to inquire--"
"Loan number, please."
"What's the loan number, please?"
"Oh, sorry. Here it is. I thought I just gave it to you. Anyway, as I was saying, we have to extend the foreclosure date. I would like to submit a loan-modification package--
"Oh, Carl Lipkin. So, as I was saying--"
"Address of the property?"
"Here's the address." I paused after relaying it, anticipating another question. I heard nothing. So once more I introduced myself and repeated my query, only to be hit with--
"Last four of social, please?"
"Here's the last four again. I already inputted those. How about the address? Here it is." I mentioned the address.
There was a pause.
I begin speaking again. "So, as I was saying--"
"And can I verify the address, sir?"
An inner voice filled my head with obscenities.
"I just gave you the address--"
"Yes, but can you please verify it again?"
I obliged. There is nothing more she can ask, I thought to myself. Just to be safe, I paused and let the dead air anticipate any other question. Nothing. Time to move ahead.
"So, as I was saying, we need to discuss a loan modification here--"
"And you are?"
"As I mentioned, I'm the representative of Mr. Lipkin--attorney Wajahat Ali, hired by Mr. Lipkin--"
"No. Wajahat Ali. I sent you my authorization yesterday. It was faxed. You should have received it. Mr. Lipkin signed it, dated it, and authorized me to represent him."
"Oh, it doesn't show up in our computers. I can't talk to you unless you are authorized."
"No, but I am authorized. I sent it yesterday."
"I'm sorry, but it takes three business days for information to be uploaded to our computers."
"Okay, but I don't have three days. You realize my client is facing a sale date in two days."
"Yes, but you are not authorized. I'm sorry."
- - - -
It was noon, and I was losing hours. The bank had refused to acknowledge my existence, let alone talk to me. Out of desperation and naiveté, I tried calling the trustee agent, whom the bank had hired to process the foreclosure sale. I learned a valuable lesson: trustee agents are useless in extending sale dates. They merely do what the banks tell them to, so calling them is a waste of time. I had to think. I called Carl.
"Carl, do me a favor. Call up the bank. Here's the number. Tell them you verbally authorize me to speak on your behalf as your representative. Do it now. I'll wait on the cell with you; pick up another phone and call."
Carl obliged, and we waited another half an hour before he finally reached a human being.
The rep asked us to hold. She spoke to a supervisor. She came back.
And then we had a one-day get-out-of-jail-free card in the form of a twenty-four hour verbal authorization. We were off the bench and ready to play ball.
- - - -
Taking the absurdly high $4,300 mortgage into account, the Lipkins were falling into a monthly deficit. If the bank would simply reduce the monthly payments to a fair reflection of the property's current value and the Lipkins' current financial situation, the family would easily be able to make the monthly payments, keep the home, and continue giving the bank substantial amounts of money.
One would think a financial institution would consider this a viable and wise short term solution, considering the country is mired in one of the worst recessions in recent memory. However, wishful thinking is not one of the options on the bank's automated phone service. One might also assume the banks operate purely out of greed and avarice--but if that were the case, they would simply take the short-term money from the clients instead of wasting resources on foreclosure costs, appraisals, and reselling a house that had been brutally reduced in value.
In fact, shockingly, the banks are mostly apathetic, confused, poorly informed, and poorly managed. The left hand has no idea what the right hand is doing. I imagine a giant warehouse where underlings paid minimum wage simply parrot a written script, crunching numbers in a giant database in which a thousand tubes and wires cross and intersect one another but ultimately lead nowhere.
I called the loss-mitigation number again only to be informed that they could not help me, and that I needed to talk to the bankruptcy department instead. I talked to bankruptcy, who told me to go back to loss mitigation, who then told me to call the trustee agent because they were not authorized to extend the sale date. The trustee agent gave me a random number of some realtor in Arizona who was shocked that I had been given her number. I went back to the loss-mitigation department and asked for the number of their legal counsel, so that I could fax my legal-demand letter. I learned that no bank ever gives you their legal-department phone or fax number; they simply give you an address and ask you to mail your legal complaint. I finally received a number for what I assumed was corporate counsel, who then called me and asked why I was calling her. I told her about the foreclosure; she was sympathetic. But she said "I have no idea why they would give you my number--that is odd. Try this number instead, and best of luck to you and your clients."
I wrote down the number she gave me. Then I realized it was the number for the loss-mitigation department.
I looked at my notebook and saw a dozen numbers written down over the span of three hours. There were arrows pointing from one number to another, including the numerical options I had to punch into the automated message system in order to reach the appropriate department. My notepad resembled a Cy Twombly painting.
The loss-mitigation department finally talked to me after I used my "adult voice" and expressed some mock anger. Having gotten them to agree to review the file, I expected them to give me the proper fax number to send over the loan-modification package. Instead, they came back and said, "There are two loans on this file."
"Of course," I replied. "They've been there the whole time. Both are from your bank. We're dealing with the primary loan, which is currently under foreclosure."
"Oh, we're not the right department for this. You have to call the dual-lien department. I'm sorry about that. Someone should have told you."
"Yeah, you should have told me that three hours ago, you stupid, incompetent, apathetic son of a goat-herder!" I didn't say this out loud, but the outburst would have been well earned.
I expanded my Twombly painting and added another number. I called the dual-lien department only to discover that they had left for the day.
I called the loss-mitigation department again and prepared an angry speech filled with bile and witty barbs. I was ready to unleash it on the poor, unsuspecting customer-service representative when a kind, all-American, Midwestern-motherly voice picked up the phone and started endearingly referring to me as "Dear." After two minutes of talking to her, it was abundantly clear that this was her first day on the job. My brilliant anger was reduced to mush, like country applesauce. It took her several minutes to load the file; she had just begun learning the computer system.
Exasperated, I finally asked--in a soothing and respectful voice--"Ma'am, can you simply ask a supervisor for the dual lien department's fax number, and the number I should try for an escalated sale date?"
She said she would, and returned after what seemed like ages with both. I finally had my key to the elusive gates. When I thanked her she responded with a few more "dears," "sweethearts," and "honeys," before adding a "best of luck."
I looked over my legal-demand letter, which used some subtle but heavy-duty "we mean business" language. Then I recited some verses from the Quran, blew on the paper, prayed for the best, and faxed the package. It was nearly 5 p.m., and I felt like a battered warrior who had honorably survived the first day. I called Carl to give him the update and ask him if he'd filled out an emergency bankruptcy petition, as I'd instructed.
A little fact that most people don't know is that if you file an emergency bankruptcy petition, you receive an automatic fifteen-day stay on your foreclosure. It's a borrower's Hail Mary. For fifteen days, the bank cannot foreclose your house, and you have those two weeks to either withdraw your application or complete your bankruptcy. But timing is key. If your foreclosure is scheduled for 9 a.m. and you file the petition at 9:05, you are officially out of luck. If you file at 8:59, then you are saved.
Just in case the bank continued acting like unresponsive jerks, though, I wanted Carl to have the option to file for bankruptcy. I'd told him the night before to call a paralegal and have the paperwork signed and ready to go, and he'd promised me he would.
"Nah, man, I didn't do that," he told me. "Was I supposed to?"
"Yes, Carl,'' I said, trying not to choke him through the phone, "you were supposed to do it several hours ago. You need to do this. Listen to your attorney, please. Have you found a paralegal nearby?" I knew full well the answer would be no.
I hung up, raced to the computer, and Googled paralegals near Carl's county. I found a number, called it up, and heard an exhausted woman on the other end.
I used old-school ethnic-salesman tricks to convince her to stay late at her office and wait for Carl, who would drive over in the evening after picking up his kids. I promised her I would give her "good business" and use her services repeatedly. I would recommend her to my "clientele." She grudgingly obliged, grumbled, and told me Carl had to be there by 7 p.m. or she was leaving.
I waited at the office for Carl to call and confirm he'd made it. One hour passed.
And then a phone call.
"Got it, Waj! We're good to go."
I exhaled. Day 1 was over. Neither a victory nor a loss--a stalemate for sure. The package was faxed off to every single number I'd written down on my yellow canvas. The young attorney and the shit-covered bear retired to their respective corners.
- - - -
The next morning, I jumped out of bed yelling "What the hell!?" I looked at the alarm with bloodshot eyes. It was 10 a.m. Day 2. Another sleepless night.
This time the dual-lien department would not escape my wrath. I called them first thing, and, like a biblical prophet, unleashed a righteous fury at the underpaid underling.
"Just listen to me, because I don't want to waste my time. My name is Wajahat Ali, retained counsel for Carl Lipkin. I sent my authorization two days ago and you should have uploaded it into your system. If you haven't then that's your fault, but you're going to listen to what I have to say. My client has a trustee sale date tomorrow and he has tried in good faith to negotiate with your bank for weeks, only to be consistently mistreated. Thankfully he has retained me, and I know what I'm doing.
"Your supervisors and their supervisors will not appreciate me filing a Chapter 13 bankruptcy that will halt and frustrate your foreclosure proceedings. Furthermore, they will not be happy to discover the pending results of a forensic audit being done on the loan, which will reveal a stated-income loan approved by your bank in direct violation of federal and state lending laws--a total breach of a fiduciary duty owed to your clients. As several recent cases have held, the damages and penalty for such egregious behavior is generally a rescission of the entire loan.
"So, you all have a choice: either foreclose on a worthless property which has no equity and has lost more than fifty percent of its original value, or in good faith negotiate with me and my client for more equitable payment terms and receive some money instead of no money. If you want to play hardball, then don't waste my time. I'm filing a bankruptcy. Now get me your supervisor."
The service agent didn't speak for a moment. "Uh--um. Just... hold on. I'll get a supervisor." Two minutes later, a supervisor came on the line. Before he could get a word off I unleashed my next can of verbal whoop-ass, reiterating nearly word for word what I had just told the underling.
The supervisor didn't speak for a moment. "Uh--um. Okay. Just... don't file bankruptcy, please. Just... here--call this number."
For the first time I received a phone number with an actual area code. He gave me the name of a human being, too: "Brian the Supervisor."
"I'll definitely call him, sir. But I want to know who I'm speaking with so I can verify that this conversation occurred." I sounded like a paranoid ethnic uncle.
"Sure. My ID number is John X1Z."
"Thank you very much, John X1Z. I appreciate it. You'll be hearing from me soon."
I called Brian the Supervisor expecting to reach a wrong number or a random factory in Chile. Instead, I discovered an answering machine.
With the scant two minutes I had before the machine decided to stop taping, I unleashed my verbal fury yet again, this time at a machine-gun clip. I rattled off the loan number, repeating it twice, then added the last four digits of the social and even threw in the address for good measure. Then I recited my biblical-prophet speech, said thank you, hung up, and exhaled.
One hour passed. Nothing.
Another half hour. Nothing.
And then a phone call on my cell, which was on its last battery bar for the day.
"Um, sir, yes, this is Brian. Uh, please do not file bankruptcy. We, um, do not want to foreclose on this property. Please just, uh, be patient with us."
"All I need to know is whether there is an extension on the sale date."
"Yes, sir. We have extended it."
Okay, so I didn't say that out loud, but I was genuinely shocked. They actually extended the sale date! The big, bad, mean bank, which had assured me nearly a dozen times that things were hopeless, that nothing could be done, that the Lipkins should prepare to move out, had just told me the foreclosure would be delayed for a month.
"Well, thank you. I would like confirmation of this. I look forward to talking to you soon," I said in my serious, sober adult voice, barely containing my schoolgirl glee.
I hung up and sat down. I couldn't believe it. Those bastards had flinched, and the family would get to stay in their home and fight for another day.
I called up Carl to tell him the good news. He replied with the longest "Oh thank God!" I have ever heard. I could hear Natalie screaming for joy in the background. For a moment, the cloud of desperation had lifted. A besieged family could breathe for the first time in months. An incompetent and callous bank would actually review a viable loan modification package.
And I would not get disbarred. At least for a month.
However, out of the corner of my eye I spotted the bear. He was still smiling. He had plenty of fight left in him.
- - - -
On the following Monday, three days after the original sale date, I received a fax from the bank.
Confirmation of loan-modification package received July 22. 2:32 p.m. Thank you.
Then I received another fax.
The loan-modification package has been denied. July 22. 2:34 p.m. Reason: not enough income. Thank you. New Sale Date: August 21.
Essentially, some underling had merely inputted the income and expense numbers into the computer, pressed enter, and waited for the result.
The computer recognized that the family was making less money than its expenses--which is utterly predictable and logical, considering they were asking for a loan modification because they were unable to pay their currently exorbitant monthly mortgage--and mechanically turned them down.
And the shit-covered bear flashed a devilish grin.
- - - -
"Right, I'd like to move on it now so we don't waste time, and so the family doesn't feel unnecessary pressure from the bank. We would like to operate in good faith."
"Yeah, but it's four weeks from now, why are you calling us?"
"So we can get this over with now and move on."
"Oh, well, let me tell you--they don't do anything this early. I mean, the only time I've seen them extend the sale date is within three days of the sale. I've never seen it happen earlier."
I was shocked. I literally couldn't come up with anything to say in response. Here was a customer-service representative admitting to me that the bank deliberately stalled on approving loan-modification packages. They were keeping borrowers hanging underneath a guillotine until the very last minute.
"So, wait, you're telling me they won't do anything before the three-day mark? They intentionally just ignore the situation and their clients instead of helping them or working toward a negotiation?"
"Yeah, um, well, I mean... I really can't say for sure, but, um, you know, I haven't seen them do it, like, ever. They'll always wait until the last day, if possible. So, I mean, I know you're trying to help, but I'd recommend waiting a few weeks."
Apparently the early bird loses both the worm and its nest when dealing with banks and foreclosures. My friend's girlfriend, who conveniently works in a bank's corporate department, told him her bank had issued an internal policy notice explaining that they would only delay foreclosures if an attorney threatened to file a lawsuit or a bankruptcy petition. This information was not meant for mass consumption. When I heard it, I thought of all the well-intentioned, hard-working moms and pops who lost their jobs, their revenues, and their assets, and who couldn't afford an attorney to negotiate on their behalf. Who could they turn to, after the customer service agents denied them for weeks on end? Who could they pay to represent them, after a supervisor told them a "negotiator" would call them back, and no one did?
I summoned the image of the gladiator Maximus. And in my melodramatic fashion, I promised, I will have my vengeance, in this life or the next.
In the meantime, I concentrated on obtaining all the signed loan documents from the bank. Carl had made a fax request and a phone request for them two weeks ago; I needed these documents to verify that his loan was indeed a stated-income loan, and that he'd written $26,000 as his monthly income even though his actual salary was only $26,000 a year.
I also wanted Carl to get a forensic audit of his loan from a financial-services company. An audit costs around three hundred dollars, and it helps us attorneys get a financial snapshot of what actually went wrong with the loan, from origination to completion.
When I called the bank to demand the loan documents, though, they gave me a number for a RE/MAX title company located in Arizona. Like me, the RE/MAX office was confused about why I was calling and how the bank had gotten their number. I spent another hour waiting for the right customer-service agent to direct me to the appropriate department, where I was promised that the loan documents would be both faxed and mailed within the next forty-eight hours.
To this day, I have yet to receive them.
Thankfully, a week later, the bank sent Carl a package containing everything I needed. We sent the documents over to the financial-services company, received an audit, and found considerable violations of federal and state lending laws. Furthermore, some exquisitely tasty case law supported our arguments. We were in business. It was time to write a firm and potent legal-demand letter.
Carl was receiving five hundred dollars a month in extra income thanks to his wife's sister renting a room in his home. One of his family members had taken over a debt, thereby decreasing his expenses. And his legal duty to pay alimony had expired, thereby freeing up another three hundred dollars monthly. According to the new numbers, he was just barely making more than his monthly expenses. Knowing full well that the computer gods would simply see this as a net positive, I updated my legal-demand letter with the new financial information and faxed it off.
I called a week later; Judgment Day was about three days away. Unsurprisingly, they had yet to move forward on the loan modification. The foreclosure date was still in place.
I called Brian the Supervisor and learned that he was away on business. I was told to talk to Lisa the Supervisor in his stead. Calling Lisa, I realized that she would never answer the phone--I would always be greeted by a mechanical voice.
As I stood pumping gas, I dialed her again on my cell phone, which again had only one bar of energy left. I declared that I was calling from "the law offices of Wajahat Ali" as expensive unleaded gasoline filled my barely living 1997 Toyota Camry. I reiterated my hall-of-fame speech and prayed to Allah that someone would eventually hear it. I threatened severe legal consequences if I did not receive a response within two days.
The robotic lady informed me that I had thirty seconds left on the answering machine. I blurted out all the necessary information, said thank you, left my number, and hung up.
About ten minutes later, I received a call from Lisa. She informed me that the bank had decided to extend the sale date for another month.
I exhaled, and kissed my California State Bar card. I called up Carl to give him the good news as I sat outside of a local Starbucks, relishing my victory with a venti caramel frappuccino with extra caramel sauce.
"Wajahat, I love you!" Carl shouted. "If I had a million dollars, I would buy you a Lamborghini. Really, I would. A Lamborghini!"
And I slurped my frappuccino with a big, sloppy grin plastered on my face. As I looked in the rearview mirror, I spotted the bear behind me drinking a latte with honey. He looked a little worn out.
Before disappearing, however, he flipped me a middle finger to remind me the battle had not ended.
- - - -
THE LAST STAND OF
THE FECES-COVERED BEAR
I hate to throw in yet another analogy, but I will anyway: Being a young attorney taking on a corporate bank is kind of like Rocky IV, but without the talking robot, the American jingoism, Apollo Creed, and Mikhail Gorbachev suddenly appearing at the end to cheer you on.
The bank is Ivan Drago, Rocky's nearly indestructible and relentless nemesis, who is nurtured and supported by a massive collection of trainers, helpers, and multimillion-dollar equipment.
Us lowly solo practitioners find our avatar in the aging and decrepit Rocky Balboa, who trains with limited materials, eats raw eggs, drags logs through snow-covered forests, and endures persistent belittling by the cantankerous, mildly racist hype-man Paulie (or, in my case, my parents and former law professors).
Although life is not scripted like a formulaic, feel-good movie, I secretly hoped that I could earn Wells Fargo's respect through my sheer stubborn resilience. I wanted to inspire fear and trepidation in their fickle hearts. I yearned for them to be shocked and awed by my tenacity, much like Drago was when Balboa withstood fifteen rounds of punishment, thus prompting the now-famous utterance (preferably in a Russian accent): "He's not human. He's like a piece of iron."
For me, it was the beginning of the fifteenth round. The bear was spitting out blood, sweat, and a few teeth. He drank his honey-flavored water from his water bottle one last time, disrobed, and wearily stood up from his stool. The tenacious bugger still had legs, even as his knees had finally begun to buckle. The bell rang.
I waited a week before calling the bank's loss-mitigation department again, anticipating another spectacle of mind-numbing, head-scratching inanity and countless runarounds.
Surprisingly, the underling I reached was uncharacteristically engaging.
"Oh, we were just waiting for your profit-and-loss statements for the past three months and updated financials."
"Really? No one informed me or my clients. What exactly do you need for their profit and loss? And didn't we just send you all of the financials a week ago?"
"Well, since they're self-employed, we need some proof of income and expenses for their business. And please send us their latest pay stubs and bank-account statements."
This news was both welcoming and frustrating. Apparently Wells Fargo either really hates trees or really adores fax machines, because in my experience they repeatedly ask you for the same materials you've already sent.
It was encouraging, though, because the bank was now also asking for new information, and seemed intent on actually reviewing the financial statements instead of callously feeding them to their computer god, which would instantly condemn the family to foreclosure perdition.
Unfortunately, Natalie had not compiled a reliable profit-and-loss statement in months. Over the course of the week, though, we assembled an accurate three-month snapshot of the Lipkin family business. The family had--just barely--made a small profit, which would ensure they could afford reduced monthly payments to the bank.
I lined up the numbers properly in the Excel sheets and bolded the key information, placing everything in a strong Times New Roman, size 12 font so that even an elementary- school student would be able to find the "income," "expenses," and "profit" totals.
I topped off the package with a lengthy legal-demand letter outlining all the potential violations the bank had perpetrated with their "stated income" loan to the family, and reminded them that the house was continuing to depreciate in value and that the family would seek legal options if they were not afforded a good-faith payment plan.
Standing before the fax machine, I held in my hands what I hoped was the final loan-modification package I would have to prepare for the Lipkins. I engaged in my customary ritual: I recited a small prayer, blew it over the papers, double-checked the fax number, punched it in the machine, and sent it twice to appease my OCD.
The bear reeled against the ropes after I hit him with two uppercuts and the final knockout hook. His eyes rolled, his knees weakened, he desperately flailed against the ropes, and finally he went down, leaving a stain on the boxing ring.
The referee started the final count.
1... 2... 3... 4... 5... 6--
And, out of nowhere, unexpectedly, a week later, I received a fax from the bank.
We regret to inform you that the borrower's application was denied on August 14, 2009 because his expenses were more than his income.
And the bear rose to his feet, smiling recklessly. I swear I heard him say, in a Russian accent: "I must break you."
The bank's lethal jab of incompetence made it painfully clear that billions of dollars in bailout money apparently cannot be used to purchase a five-dollar calculator.
Wells Fargo had somehow not only misread the information, but apparently created fictitious numbers out of thin air. The bank had pulled a Merlin, magically conjuring up an extra $3,000 worth of expenses for the Lipkins and inexplicably reducing their verified income, thus inaccurately showing a loss instead of a profit. I was no longer angry, depressed, upset, irritated, or frustrated. I was just confused. How was this possible? I'd clearly highlighted the total income and expenses in both the financial worksheet and the business's profit-and-loss statements.
I just sat there and shook my head, convinced a team of supernatural ne'er-do-well jinns were intentionally screwing with my absolutely solid loan-modification package.
Alas, this was yet another humiliating scene from the reviled, unending soap opera entitled As the Bank Turns... And Screws You--Again.
Well, I was tired of being messed with by the banks, and so were my long-suffering clients. I used my last remaining morsel of strength to shift my biblical prophet anger to D-5. I laced up my gloves again and stared at the Bear. We ran toward one another at full speed. We would meet at the center of the ring and exchange our final death blows.
This would be the clash of the titans. The end game. All or nothing.
The winner goes home--literally.
I sat and furiously wrote my final legal demand letter:
There is a trustee sale date scheduled for August 25, 2009. The borrower has already submitted a viable loan-modification package that was confirmed as received. The borrower was informed that his loan modification application was denied on August 14, 2009 because his expenses exceeded his income. This conclusion is blatantly incorrect based on the information provided, which shows the client--with the financial assistance of his domestic partner--made an income that is above his current expenses. This denial, based on an inaccurate assessment of the documents, represents either gross incompetence on the part of the Wells Fargo loan-modification department or a fraudulent misrepresentation in order to deny a viable client a suitable loan modification. The borrower is now re-sending a loan modification package with all the appropriate information requested.
I sent off the new letter along with the same financial documents and waited. The foreclosure sale was only a week away.
A day before the foreclosure date, I called the bank. Would they relent and extend the foreclosure date again? Was this the end of the road for the Lipkin family? Had I been able to score a Slumdog triumph?
The robotic voice came on the line.
The atrocious elevator music soothed me.
A female underling took the call and asked the monotonous, routine questions. I answered them. I paused. I closed my eyes. I hoped for the best. I exhaled. And then I asked about my clients' status.
"Oh, your clients have been accepted into the HAMP. The material was sent out yesterday."
"Uh, what? Excuse me? What about the foreclosure tomorrow?"
"Oh, no, the foreclosure sale has been lifted. There's no foreclosure date anymore. Your clients have been approved for a temporary program. As long as they can make payments of two thousand dollars for three months, they can stay in their home. And the bank will be willing to negotiate after that."
"Wait... are you serious?" I asked, losing my professional composure.
"So, uh, there is no foreclosure?"
"Okay, thank--thank you."
I hung up. I couldn't believe it.
In fact, I didn't believe it, so I called twice more and endured nearly thirty more minutes of excruciating elevator music and two more underlings, who both confirmed the news: the Lipkins' house would not be foreclosed. President Obama's newly minted Home Affordable Modification Program had allowed their loan to be modified at last.
I called the Lipkins up to tell them the good news.
"Okay, Carl. You want the good news or the bad news?"
"Oh, man. Bad news first. Just hit me with it."
"Bad news: there is no foreclosure sale."
"Wait--isn't that the good news?"
"No. The good news is that you've been accepted into the HAMP for three months. As long as you make the payments, you can stay in the house. Eventually they'll work out a long-term arrangement with you, but for now we're safe."
"Wajahat, I love you! I love you! Oh, man, this is great news! Thank you! This is the best news I could have gotten! Thank you!"
I told him to enjoy himself. To tell his family to relax.
"Will do, Chief!"
I turned off my ailing BlackBerry and sat back on my chair--exhausted, bewildered, relieved, and fulfilled.
A family that had been repeatedly ignored by the bank and told that nothing could be done to stop their foreclosure had just been accepted into HAMP. A family that a few months ago only had three days left before their foreclosure could now sleep peacefully in their home for a few more months, without fear of a trustee sale creeping around the corner.
The Lipkins sent their second payment in this week, thus ensuring that they're making good on their new temporary contract with the bank. Yesterday the bank informed me that after having originally denied the loan-modification package on the Lipkins' second loan, they had entered them into a two-year forbearance program. The family will now pay half of the original amount per month. On the principal loan, they are now paying less than 40 percent of their original amount. Overall, their monthly mortgage payment has been reduced by nearly $1,600.
The bank's pattern of behavior signals a desire to enter into a binding long-term agreement with the Lipkins, thereby ensuring lowered monthly payments and an ability to accommodate their financial situation.
Everyone wins. The bank saves tremendous costs in not having to foreclose and ensures that it will receive regular monthly payments. The family no longer lives under the specter of impending eviction, the children are not uprooted from their schools and friends, and the Lipkins are finally on a path to reclaiming their home as their own.
And the terrified, inexperienced, snot-nosed, Pakistani-American lawyer who wears white high-tops with his clearance-rack Banana Republic sports jacket and has eight dollars in his savings account? Who survives on his mother's food?
His five-o'clock-shadowed face is plastered with a twelve-year-old boy's smile as he sticks out his chest and rests his foot on the belly of a shit-covered bear, temporarily defeated. And his white high tops shine without a stain.
- - - -
After an epic, brutal and exhausting 14 month fight, the shit-covered bear known as Wells Fargo has relented and agreed to a long term loan modification for the Lipkin family. A family that only had three days until eviction last July, now has a new, 40 year contract. Although the bank didn't agree to a principal reduction--very few banks agree to a principal reduction nowadays--they extended the terms of the contract by 15 years and lowered the interest thus making the monthly payments affordable and reasonable. My clients were paying nearly $4,100 a month on a ludicrous 8.095% interest rate. Their current payment is now $2340/month with a 2% interest rate. The interest rate will cap at 4.35% on the 8th year and remain for the remainder of the contract.
THE LIPKIN FAMILY'S STORY WOULD BE DIFFERENT IF WELLS FARGO FORECLOSED TODAY.
On October 13, Governor Schwarzenegger signed SB 94, coauthored by the chairman of the California Senate banking committee, Senator Ron Calderon, and Senator Lou Correa of Anaheim. The bill prohibits anyone from accepting advance fees for working on loan modifications--meaning the Lipkins could not have legally hired Ali unless he was willing to work months without pay. The legislation is intended to prevent predatory loan modification scams from taking advantage of homeowners. But the language lumps lawyers with brokers, meaning lawyers will be unable to charge retainers. The bill is likely to reduce the supply of lawyers working on loan modifications, and thus decrease the actual number of modified loans, because lawyers can now ask for money only after their job is finished--successfully or not. This could mean months of work in the hope that at the end, a client who is by definition a credit risk will find the money to pay. SB 94 will, though, impede certain types of fraud. The law would have prevented the Lipkins' trouble with Rodis Law Group, the lawyers the family retained before they found Wajahat. Ron Rodis was disbarred October 15, and Rodis Law Group is under Federal Trade Commission investigation.
- - - -
Originally published in McSweeney's SF Panorama
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