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HELP!! Wells Fargo Balloon Loan!!

Discussion in 'Wells Fargo - American Servicing Company (ASC)' started by 4frodo, Feb 19, 2010.

  1. 4frodo

    4frodo LoanSafe Member

    I posted this a couple days ago on a thread started by Stillhoping. He and many others offered some really great advice. I wanted to post it in a more general area to see if anyone else is in a similar situation and find out what on earth I can do to avoid disaster. I'm a year out from losing the shirt off my back. Please read the following and feel free to offer any suggestions. I want to be proactive, but I have no illusions about how much trouble my wife and I are in. :(

    My wife and I bought a two-bedroom condo for $357,000 in Virginia in March 2006 at the height of the market. We have excellent credit, never miss a payment, have zero credit card debt (pay the balance off each month), a small student loan with very low interest, and we own the title on our single car (old ’97 Honda). We are pretty frugal people. We were more than excited to buy our first home. Unfortunately, the bottom fell out on the housing market a few months later and the value of our condo dropped to an estimated $215,000 -$240,000.

    We have an “80/20†interest-only Wells Fargo loan with a five year ARM that resets in March 2011. When the ARM resets, we also have a $70k balloon payment that comes due all at once. Looking back, I’m not sure how this seemed like a good idea when we signed the papers. Even if we had equity in our home, this is a shady loan and there is no excuse for this huge mistake. We did not know what we were getting ourselves into, and no one predicted the crippling collapse of the housing market. Currently we have about $30k saved up for a rainy day, but nowhere near the amount to cover the balloon payment or the overall $142k - $117k loss in value.

    I am writing you because I am at my wits end. I am so scared about our financial future that sometimes I think it would be better for me to crash into a bridge abutment so my wife can use my life insurance to get out from under this horrible burden. And it’s not because I haven’t tried to find a solution. Though I am glad we learned this lesson in our younger years, I would not wish it on my worst enemy. A once wise investment in our first home has now become a source of anguish and regret. I’m scared to death. I apologize for the great detail, but I want to be as clear as possible so we can receive some advice.

    In spring of 2009, my wife and I found out she was pregnant with quintuplets (4 girls and 1 boy). It was a whirlwind finding out we were going from two to seven in a matter of months. As we geared up to raise these kids, we were faced with some major decisions about finances, logistics, and location. One of the first people we contacted was Wells Fargo to see if we could find a way to alter the loan on our condo. Even with the prospect of my wife not working and having five extra mouths to feed, the bank didn’t budge. I suppose it didn’t really matter though because in June 2009 she went into early labor and sadly we lost each of them. My wife recovered soon after and we had a small funeral out west. I only mention this story to illustrate how frustrating it has been to work with Wells Fargo.

    Loan details:
    • Our loan is a Wells Fargo product called a Smartfit Home Equity Account
    • The Smartfit product is basically a hybrid ARM 80/20 interest-only loan
    • The 80% and the 20% are with the same lender: Wells Fargo
    • 80% - Current balance: $286,000 (6.5% fixed-rate through 03/11)
      • At the end of the fixed-rate period, the balance automatically becomes a home equity line of credit, or HELOC and the interest rate resets and adjusts annually
    • 20% - Current balance: $69,000 (7.75% fixed- rate through 03/11)
      • This is a fixed-rate option that lasts for the term of the ARM but comes due as a lump sum $70k balloon payment at the end of five years
    Over the last three years I have called Wells Fargo dozens of times to see if there is anything we can do to avoid the approaching train wreck in March 2011. For years I have clearly expressed to the bank my concern about the ARM resetting our interest rates and how we do not have the ability to cover the $70k balloon payment when it comes due. Their answer is always the same, “I’m sorry sir, but you’re making your payments, there’s nothing we can do.†Essentially, they have told me that they will not work with me until I am deficient on my payments. It’s baffling how they can ignore customers that proactively seek a solution that will be in everyone’s best interest. My wife’s pregnancy in 2009 opened my eyes to how precarious our situation could be next year if we aren’t wise in our decisions.

    Our loan with Wells Fargo is not a traditional mortgage, meaning it is actually considered an equity line of credit on both the 80% and the 20%. Traditionally a line of credit is only applied to the 20% in an “80/20†loan. This means that our “mortgage†is not owned by Freddie Mac or Fanny Mae, and is therefore not eligible for government programs. Unfortunately we did not do our homework and I think we landed in the middle of what seems to be a predatory loan from the boom-days of the housing market. From what I understand, our equity line of credit home loan is owned by a private investor and it is at their discretion to modify it based on how it will affect their bottom line. This also makes me a prime candidate for a “deficiency judgment†where the bank has several years to come after me and my wife for the balance of the loan should we short-sell or foreclose on our home. Even if I work with a lawyer, I might not be guaranteed a “no-recourse†agreement with Wells Fargo and/or the private investor.

    Out of desperation I called 888-995-HOPE, a non-profit group linked to the federal government on 2/4/10. I spoke with a very nice lady and explained the situation and my concern about the approaching disaster. She had never even heard of my type of 80/20 home equity line of credit loan and decided to get Wells Fargo on the line. Eventually we were able to speak with a representative from the home equity department who, unfortunately, gave the standard response, “I’m sorry sir, there just isn’t anything you can do at this time…you’ll have to wait until March 2011 for us to help you.†Wells Fargo encouraged me to refinance my loan, to which I asked, “How can I refinance a loan on a house with $150k in negative equity?†They had no response, nor did she offer to help put me in touch with anyone who could answer my questions. All the while, the lady from the HOPE-line attempted to make sense of the mess I was in. After we realized no good was coming from our conversation with Wells Fargo, the HOPE-line representative could only offer the following advice, “You need to write a letter to your senator/congressman about this. I have never heard of anything like it, and I think you need to be the person to lead the charge on a predatory loan practice.â€

    To top it all off, my wife was laid off in November 2009 shortly after returning from maternity leave after losing the babies. She has been on unemployment benefits while she looks for a new job. We were planning to raise 5 kids and pay our bills on my salary alone, so we are holding on for the time being. We have no children yet, but we hope and pray we can have a baby soon (just one for now). While we are just able to pay our loan on my salary alone, when the loan resets/balloon comes due in a year, we will not be able to make the payments.

    Please help.

    Where do we start?
    Who can I talk to?
    How do we short-sell/foreclose without Wells Fargo wiping us out years down the road?
  2. stillhoping

    stillhoping LoanSafe Member

    4frodo - Good to see you figured out how to start a thread.

    FYI - Wells Fargo never told me, but our investor guidelines prohibited any help until we were in default. We stayed current for five months waiting for assistance, tapping in to all of our reserves, and viewing Wells Fargo as dragging their feet. After having access to the agreement between WF and the investor, which clearly states the loan must be in default, I finally get it.

    I mention this, to add to my point in the other thread, that you may have a very similar guideline and not be aware. You really need to start putting the payments into a special account, and stop paying WF, to have a better handle on your options. Meanwhile, try to get information on your investor, so you can begin researching what mods and terms have been approved.
  3. gz9gjg

    gz9gjg LoanSafe Member

    I suggest you apply for HAMP, but tell your lender that you cannot afford / do not want to stay in the home, and request assistance under HAFA. See these links:

    Making Home Affordable - FAQs
    https://www.hmpadmin.com/portal/docs...cer/sd0909.pdf

    Good luck . . .
  4. Tapeoka

    Tapeoka LoanSafe Member

    4frodo -

    So happy to stumble upon your thread. It really helped me better understand what loan package we are dealing with because I was having a hard time understanding what WF mean when they say it's an equity line or equity loan when don't have any equity in the house AND never applied for an equity line. And no one seems to have heard of the loan package we got. I have been fighting them for almost 2 years trying to get them to modify. No one I spoke to have ever heard of my loan package but then I came across your post and that is the exact same deal we got thanks to our crooked neighbor/loan broker! We are out in California SF Bay Area. WF refuse to do anything for us because they tell us we are not in default and that the investors on our property are "private investors" but refuse to provide any other information on them. We have a balloon payment due of $90,000 on the second loan due 2022 and the ARM on the first loan resets 2014. Reading your post I am even more scared about them coming after us even if we foreclose/short sale because of the type of loan. I have tried everything from writing to the top guys at WF, Congress, filing complaints with BBB, Controller of Currency, etc. but have not been able to get any help. What is your status???
  5. Tapeoka

    Tapeoka LoanSafe Member

    Attn: All Homeowners who have been wronged by WF!!!
    Now is your chance to join in a class action filed against Wells Fargo on November 23, 2010 by the Law Offices of Harwood Feffer LLP for CA residents. The lawsuit alleges WF mislead many homeowners by telling them they had to be in default to qualify for a loan modification and then turn around and foreclose or short sale their homes!!!! For more information please go to www.whesp.com and click on the America's Servicing Company & Wells Fargo tab and it will tell you how to join in on this class action!! Let’s bring these jerks down!!
  6. Tapeoka

    Tapeoka LoanSafe Member

    Just found out this class action agains wells fargo is not only for ca homeowners but all homeowners who were mislead by wells fargo in thinking they had to be in default in order for wf to grant them a loan modification and/or went through the trial period and wf failed to grant them a permanent loan modification!
  7. juskilentime

    juskilentime LoanSafe Member

    I would walk away and if a deficiency judgement is placed on you, file bankruptcy and start anew. Or at least that's what I would tell WF and see if they can come up with a refi solution.

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