Wells Fargo Suing Itself In Foreclosure Actions Becoming Common??? Proliferation Of 80/20 Mortgages During Housing Boom Cited As Reason

In Hillsborough County, Florida, Dow Jones Newswires columnist Al Lewis opines:

• You can't expect a bank that is dumb enough to sue itself to know why it is suing itself. Yet I could not resist asking Wells Fargo Bank NA why it filed a civil complaint against itself in a mortgage foreclosure case in Hillsborough County, Fla. "Due to state foreclosure laws, lenders are obligated to name and notify subordinate lien holders," said Wells Fargo spokesman Kevin Waetke.

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• In this particular case, Wells Fargo holds the first and second mortgages on a condominium, according to Sarasota, Fla., attorney Dan McKillop, who represents the condo owner. As holder of the first, Wells Fargo is suing all other lien holders, including the holder of the second, which is itself. "The primary reason is to clear title and ownership interest in a property to prepare it for sale," Waetke said in an email exchange. "So it really is not Wells Fargo vs. Wells Fargo."

• Yet court documents clearly label "Wells Fargo Bank NA" as the plaintiff and "Wells Fargo Bank NA" as a defendant. Wells Fargo hired Florida Default Law Group., P.L., of Tampa, Fla., to file the lawsuit against itself. And then Wells Fargo hired another Tampa law firm -- Kass, Shuler, Solomon, Spector, Foyle & Singer P.A. -- to defend itself against its own lawsuit, according to court documents. Wells Fargo's defense lawyers even filed an answer to their client's own complaint.

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• Rather than suing itself -- a stunt that was never even attempted on the MTV show "Jackass" -- wouldn't it be easier for Wells Fargo to release one of the liens to itself? Or pursue some other internal accounting strategy rather than tie up the court with nonsense?(1)

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• Still trying to comprehend this legal lunacy, I called the Florida Bar, which put me in touch with Florida mortgage foreclosure lawyers. One of them, Tampa attorney Kristofer Fernandez, said he's seen several cases where a large bank has sued itself for foreclosure as the holder of both first and second mortgages. "Four or five years ago, you would have never seen this," Fernandez said. "Now, it's very common."(2)

For the story, see Wells Fargo Bank Sues Itself.

(1) "This is just folks cranking out paperwork without conscious thought," said Anthony Sabino, a law professor at St. John's School of Law in New York City. Sabino added that it is possibly more confirmation of the old saw that a lawyer is one who can speak from both sides of the mouth.

(2) According to the column, in the final years of the housing boom, banks were lending to homeowners with no money down. To do this, they often made 80/20 loans, giving homeowners an 80% first mortgage and a 20% second mortgage.