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In Switch, Philadelphia Homeowner Forecloses on Wells Fargo

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This might be a cautionary tale for uncommunicative financial institutions and those who have not paid much attention to public relations. In a move that undoubtedly has many disgruntled homeowners cheering, a Philadelphia man has won an unusual judgment against Wells Fargo regarding his mortgage, and has begun foreclosure proceedings against its office on N. Delaware Ave.

The story is not a typical foreclosure disaster story, although it certainly has its annoyance factor. The Philadelphia Inquirer reports that Patrick Rodgers became so frustrated with his efforts to get a satisfactory resolution to his problem with the mortgage holder that he took Wells Fargo to small claims court last year. Wells Fargo didn’t bother to respond, so under a federal law called the Real Estate Settlement Procedures Act (RESPA), which requires mortgage holders to answer formal questions, Rodgers won a default judgment of $1,000.

Apparently Wells Fargo not only didn’t answer his questions, but also didn’t bother to pay the judgment, so Rodgers went to see the sheriff and initiated foreclosure proceedings against the local office. While it’s doubtful things will actually get that far, currently a sheriff’s sale is pending to satisfy the judgment.

Wells Fargo did not respond to a request by AdvisorOne to comment.

The differences between this story and the typical nightmare foreclosure story are these: Rodgers is not only not out of work, he’s not behind on his mortgage, nor is his home underwater. The essence of the issue is Wells Fargo’s determination that he should take out a homeowner’s insurance policy to cover full replacement value of his home, a six-bedroom Tudor he bought for $180,000 in 2002.

While for several years Wells Fargo had no problem handling the mortgage, in 2009 it apparently decided that his homeowner’s policy was inadequate. Rodgers’ insurer told him

that his premiums would double because the mortgage holder was insisting that the house be insured for full replacement value—approximately $1 million.

Most lenders, says the report, only require a home to be insured for its approximate market value. Wells Fargo, according to Jason Menke, a company spokesman quoted in the article, instead requires “full replacement value of the property and structure.” But the cost of replacing hundred-year-old hand construction techniques in today’s market is prohibitive, and most people would probably rather just move.

After hearing that, Rodgers did something he admits was risky: he refused the new and more expensive policy. So Wells Fargo bought forced-placement insurance and billed him for it. This type of coverage only covers the lender, not the owner. Rodgers sued under RESPA. In January, Wells Fargo sent him more than $1,000, and, according to Menke, “considered the matter closed.”

But the company never answered Rodgers’ questions—submitted in a four-page letter—about all those extra charges on his bill, to the tune of more than $500 a month. While the company says they did respond, Rodgers said that as of Monday he hadn’t seen any answers.

Anyone interested in bidding on a mortgage office? Might be a bargain.

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