Wrongful death lawsuit filed over Hermosa Beach foreclosure victim
Friends of Larry Delassus, the disabled Hermosa Beach Navy veteran who died in court in December while opposing foreclosure of his condominium, filed a wrongful death lawsuit this week against the bank that declared his loan to be in default and sold his home. Wells Fargo used loan modification applications to identify homes with equity such as Delassus’s, and then illegally seized them, according to the suit. In Delassus’s case, bank representatives refused to help Delassus bring his account current before his home was auctioned off at a profit for the bank, according to the lawsuit. The complaint further charges that Wells Fargo did so while raking in nearly $20 billion in tax breaks.
Attorney Anthony Trujillo of Hermosa Beach, Delassus’s former neighbor and friend, filed the lawsuit Monday in downtown Los Angeles on behalf of Debbie Popovich, a close friend of Delassus.
“This is a case about greed and one man’s fight for justice in the face of overwhelming odds,” the complaint said. “The banks hastily repossessed undervalued properties and sold them for considerable gains. They made record profits and their stock prices rose and their dividend payouts increased. Insiders and bank executives made billions.”
Wells Fargo declined to address specific allegations, but issued the following statement in response to a request for comment:
“Mr. Delassus’ passing was a tragic event and our deepest sympathies go out to his family and friends. The night before the scheduled hearing the judge posted a tentative ruling indicating that she planned to dismiss all the legal claims against Wells Fargo. While Mr. Delassus had every right to be at the hearing, we did not compel him to be there in any way. We have not seen the latest lawsuit and can’t comment specifically on any of its claims.
“Nobody wins when a foreclosure occurs. If our customers encounter financial hardships and face challenges with making their mortgage payments, we work hard to help them stay in their homes. When customers choose to work with us, we help 7 out of 10 avoid foreclosure. Since the beginning of 2009, Wells Fargo has helped approximately 850,000 customers nationwide with loan modifications that have included a total of $6.6 billion in principal forgiveness.”
The bank’s error
Wells Fargo placed Delassus into default after the bank incorrectly charged Delassus for back property taxes. Wells Fargo made the mistake after its tax-monitoring subcontractor First American Real Estate Tax Services, otherwise known as CoreLogic, used a wrong assessor’s parcel number to identify Delassus’s home. The parcel number was for the home of Delassus’s neighbor, who had not paid his property taxes. The bank then billed Delassus for more than $13,000 in back taxes after the bank paid the neighbor’s delinquent property taxes.
The bank was seeking repayment of the property taxes, and Delassus, who lived on $1,655 in monthly disability income through Social Security, saw his $1,237 monthly mortgage bill nearly double, to the point that he could not pay it.
Wells Fargo eventually admitted its property tax mistake, but continued to hold Delassus in default for not paying his mortgage, and it rejected his efforts to enter its loan modification programs, which might have enabled him to save his home.
The bank sold 320 Hermosa Avenue Unit 105 at auction in May 2011, without informing Delassus. He would spend the rest of his life trying to get his home back.
As the problems with the bank grew, Delassus’s health deteriorated. Delassus suffered from Budd-Chiari blood disorder, which caused him to lose consciousness and at least twice slip into a coma when his diseased liver could not process the ammonia in his blood stream. Friends said his ammonia level rose along with his level of anxiety, and his anxiety rose as the problems with Wells Fargo mounted.
“He told the bank that they were mistaken; they said no,” the complaint said. “He contacted the bank seeking information, and was told one thing and then another, and oftentimes, no information at all. He enlisted his friend and neighbor to help him, but the bank refused to recognize [Trujillo] as Larry’s representative, despite his numerous applications and appeals. Whatever Larry needed, Wells Fargo created some excuse not to help him.”
Trying to Save his Home
While going through 1,900 pages of documents during discovery recently, Trujillo said he found bank notes that shed light on how Delassus lost his home.
Delassus obtained his first mortgage from Wachovia in 1995 for $130,000. Delassus put up $15,000 for a down payment, and for the next 11 years did not miss a monthly mortgage payment, according to the complaint. In 2007, he refinanced his home. Delassus entered into a contract for a three-year, Pick-A-Payment Loan with an adjustable rate mortgage. These loans are now considered to be among the most predatory and deceptive loans made during the height of the housing bubble because of their negative amortization provisions, according to the lawsuit. In negative amortization loans, the monthly payment does not pay off any principal and does not even cover the monthly interest. The interest is added to the loan total, which means that even as the homeowner makes payments, the overall amount of money owed grows.
The Pick-A-Payment loan and subsequent refinancing of the loan caused Delassus’s monthly payments to increase to 75 percent of his income and forced him to collect aluminum cans and glass bottles for extra money, friends and neighbors said.
Delassus’s health was deteriorating, and Trujillo said that the bank took advantage of his medical condition, knowing he was having difficulty understanding complex business contracts.
In January 2009, Wells Fargo told Delassus that, according to its tax service subcontractor, he had not paid his property taxes for two fiscal years, 2007-08 and 2008-09, for a total of $13,361. Trujillo said the bank’s wrongful actions caused “confusion, stress, anxiety and fear” for Delassus, who had paid his taxes and mortgage payments ahead of schedule. Delassus mailed his March 2009 payment of $1,237 to the bank with the expectation that it would be applied to his May statement because he paid his mortgage two months ahead of schedule. The bank, however, was seeking nearly double what Delassus had been paying in order to satisfy repayment of back property taxes.
In May 2009, the bank told Delassus that he owed the bank $4,920 and placed him in default.
In June, Wells Fargo sent him a notice of intent to foreclose, claiming the loan was in default because of Delassus’s failure to make the May payment. Delassus contacted the bank twice looking for answers, but he did not get any. According to court documents, he told a bank representative that he had confirmed with the Los Angeles County Treasurer’s Office that his property taxes were current.
Court documents indicate that the Wells Fargo representative told Delassus that the bank had been told by the county treasurer’s office that his property taxes had not been paid. Wells Fargo attorneys contend that the bank received the wrong tax parcel number from CoreLogic and that’s why Delassus was believed to have been behind on his property taxes.
Delassus was hospitalized June 16, 2009, about a week after phoning the bank.
“His stress, fear, and anxiety were directly related to the bank’s efforts to wrongfully foreclose on his home,” the complaint said.
Trujillo lived next door to Delassus in the 13-unit condominium building on Hermosa Avenue and slowly became involved, helping him to try and resolve the issues with the bank. Trujillo examined Delassus’s tax documents on the Los Angeles County Assessor’s online database and discovered the tax error. In September 2010, after Trujillo had sent Wells Fargo several letters about the mistake, the bank acknowledged the error. The bank fixed Delassus’s credit history but kept him in default because he hadn’t been making his mortgage payments. Trujillo said the bank misapplied Delassus’s May 2009 payment and incorrectly increased the principal balance of the loan by $10,000. Bank officials did not correct that error when they adjusted Delassus’s credit history— which is why Delassus remained in default.
During deposition, a Wells Fargo litigation support manager testified that the bank had never told Delassus the amount of money needed to reinstate his account and make it current.
On Jan. 26, 2011, Trujillo filed suit to stop the sale of Delassus’s home at auction. A day later, L.A. County Superior Court Judge William Willett granted a temporary injunction delaying the sale. The stress put Delassus in the hospital two months later, the lawsuit said. The temporary injunction was dissolved when Trujillo re-filed his lawsuit in response to a motion to dismiss by bank attorneys.
On May 13, 2011, without providing any notice to Delassus or Trujillo, the bank sold Delassus’s condo at auction for $275,742. The bank submitted a bid on the property of slightly less than the loan amount, but the property went to a higher bid and was resold for $454,000 three months later – for a profit of $178,257.
Delassus took a cab from the hospital to his home and discovered what he feared: It had been sold. Trujillo said the new buyer contacted him, and they made arrangements to move Delassus’s belongings out of the condominium. Trujillo helped Delassus move into an assisted-living facility.
“I absolutely believe Larry would still be alive today if all that didn’t happen,” said Popovich, trustee of Delassus’s modest estate. She befriended Delassus when he moved into Carson Senior Assisted Living about a year before his death. “He just gave up hope after he lost his home,” Popovich said.
The lawsuit accuses Wells Fargo and its tax and foreclosure subcontractors of negligence, breach of contract and elder abuse. “When exposed, defendants exercised poor corporate character by falsely claiming it had corrected the error, denying any obligation to correct its past transgressions, and mounting a legal assault [to] ensure it never had to,” the complaint said.
When Delassus arrived in a wheelchair for the preliminary hearing on Dec. 19, 2012, he was incoherent as he sat in the back of the courtroom.
Trujillo says the bank required Delassus to show up in court that day by motioning to have a guardian appointed for him. In a statement, Wells Fargo maintained there was no reason for Delassus to be in court that day.
Judge Laura Ellison had inherited the case from Willett upon his retirement and had issued a tentative ruling to dismiss the case in favor of the bank. As Trujillo argued against the ruling, Delassus, sitting in a wheel chair in the back of the courtroom, stopped breathing. Attorneys quickly wheeled him out into the hallway, where court officers, and eventually paramedics, worked to revive him. He was transported to a local hospital, but died of heart failure despite the efforts to save him.
He was 62. In the new filing, Trujillo said that Wells Fargo attempted to overburden Delassus with three simultaneous motions, which needlessly forced him to appear in court, where his “body gave up.”
A common story
People who find themselves in Delassus’s situation – fighting as individuals to save their homes from wrongs committed by a major corporation – might feel that they are all alone. In fact, their stories have become commonplace.
The largest 11 mortgage lenders foreclosed on 3.9 million homes during 2009-10, the height of the mortgage crisis, according to a report released in April by federal regulators.
The big banks wrongly tried to foreclose on nearly 1.2 million homeowners during the housing meltdown, according to the report. Some never defaulted on their loans, others were protected by federal laws, and others were in good standing under modified loan programs or were forced out under now-illegal practices. All were left to defend themselves on their own against the attempts of big banks to seize their properties.
Delassus appears to be among 244,000 borrowers who wrongfully lost their homes, according to government data.
Homeowners who did apply for help rarely got it. In denying Delassus’s applications for loan-modification programs, Wells Fargo apparently was following common practice for the company. According to two lawsuits filed against Wells Fargo since 2009, the bank approved only two to five percent of the home loan-modification requests it received.
Benefiting the banks
Trujillo contends that banks used the loan-modification application to figure out how to get the most money out of a property, not how to help the homeowners.
Even after Wells Fargo had placed Delassus in default, he still had a chance to save his home. Being placed in default makes a homeowner eligible for a loan modiﬁcation, which can lower mortgage payments. Trujillo said Delassus did not need a modification, but the bank reviewed him for two programs: the federal Home Affordable Modiﬁcation Program (HAMP) and an “in-house” Wells Fargo loan modiﬁcation program governed by the state of California. The only sort of loan modiﬁcation that would have addressed his needs, however, would have included a reduction in principal or the ability to tack what he owed in back payments onto his loan amount. Neither option was allowed by either program’s guidelines. Delassus did not qualify for principal reduction because he had equity in his home, according to the deposition of Michael Dolan, a Wells Fargo litigation support manager. Wells Fargo ended up rejecting Delassus’s applications.
After the bank sold Delassus’s home, he lost about $170,000 in equity, Trujillo said.
“If the bank secretly concluded it could obtain the full amount of the loan by foreclosing, it simply told homeowners that they did not qualify because they lack sufficient income,” the complaint said.
Trujillo said that the bank offered principal reduction only when it would have lost money in a foreclosure and resale because the house in question was “under water” – the mortgage was for an amount greater than a house’s value, such as a loan for $500,000 for a home whose value dropped to $300,000 after the real estate bubble burst.
“But [the bank] already lost that money. The people could have walked out of their houses and [the bank] would have lost,” Trujillo said. “All the people that [the bank could] actually still make their money off, they didn’t get any help.”
U.S. Treasury Department guidelines govern the HAMP loan modification program. A treasury department spokeswoman would not comment on Trujillo’s claims because of the pending litigation.
Abuses in the mortgage industry led to a settlement earlier this year between the big banks and federal and state regulators, ending a more detailed case-by-case review of bank files authorized by an agreement made in 2010, during the height of the mortgage crisis. In the new settlement, 13 banks agreed to pay $3.6 billion in settlements to 4.4 million homeowners who received foreclosure notices in 2009 and 2010. Most of the borrowers are expected to receive the minimum payment of $300, according to published reports. The amount would have been higher if regulators had more accurately determined how many foreclosures were done in error, but federal regulators say they cut short the review process in order to provide a more speedy payment.
Trujillo said that many of Wells Fargo’s actions toward Delassus are now illegal under the Homeowners Bill of Rights, which went into effect Jan. 1, less than two weeks after he died. The code prohibits “dual-tracking,” in which the bank proceeds with the foreclosure process while reviewing a borrower for a loan modification, as Wells Fargo did with Delassus. The code requires that the bank establish one representative to provide information to a borrower, and the bank must notify a borrower of an impending foreclosure sale. The code also prohibits robo-signing, which means automatically processing documents without anyone confirming whether they are correct.
“The act requires that the foreclosing entity must have someone who is familiar with the actual transaction – what a novel thought – and, in the event of default, to prevent further foreclosures and non-defaulting borrowers,” said Lawrence Jacobson, a real estate attorney who learned of Delassus’s story after reading Easy Reader.
“That’s a good thing. That probably would have helped [Delassus],” said Jacobson, a veteran expert witness in California real-estate disputes.
The lawsuit names Wachovia, CoreLogic, Wells Fargo and Ndex West, a mortgage default processing subcontractor that provided services to Wells Fargo during the default and foreclosure process against Delassus. CoreLogic and Ndex West are Wells Fargo shareholders, according to the complaint.
A spokesperson for CoreLogic declined to comment, citing the pending litigation. Ndex West LLC did not immediately respond to a request for comment.
The complaint said that the IRS quietly issued a rule change in September 2008 that allowed Wells Fargo to “fabricate losses it had not actually incurred and avoid paying taxes on profits it expected to generate over the next few years, overturning a law that had existed for decades.”
Wells Fargo received $18 billion in tax breaks from 2008 to 2010, the complaint said. Wells Fargo earned about $49 billion in profit during this time. The bank was the largest recipient of corporate tax subsidies between 2008 and 2010.
When Wells Fargo acquired Wachovia in 2008, it essentially traded $15.1 billion in stock for Wachovia’s $812 billion in assets, which included Delassus’s Hermosa Beach home, Trujillo said in court documents. Wells Fargo then targeted these assets for sale, according to the lawsuit.
Trujillo wrote that in direct contrast to the misfortune suffered by Delassus, Wells Fargo experienced record profits during the time it was defaulting, foreclosing on and selling properties.
Trujillo said Wells Fargo, like other major banks, declared loans in default and sold the properties in order to cash in on insurance contracts for the loans.
“The bank became the nation’s largest home lender by selling homes, such as Larry’s property, to itself for far below fair market value, collecting reimbursement for these ‘losses’ from Fannie Mae and through derivatives; and then reselling these homes it had purchased for a significant profit, and oftentimes providing the purchaser with a new mortgage,” the complaint said. “As a result, by the end of 2012, the bank had achieved seven consecutive quarters of record profits, including twelve consecutive quarters of rising profits after ‘purchasing’ Wachovia.”