A news article today reports that Wells Fargo is selling residential mortgages to debt buyers. It paints an extremely bleak picture of the practice. The author makes the mistake of assuming that anyone within these massive financial institutions ever cared, or ever should have cared, about the borrowers who had neither the resources nor the simple common sense to protect themselves from predatory loans with awful repayment terms.

The article quotes a housing counselor who characterizes the practice of selling loans as “cynical”. I do not mean to slight him, but is this the first time that he has become aware that it is not mere cynicism which pervades the dealings of large business with consumers but rather absolute and total indifference? Once this fact is accepted, the rest of us, who do care, can work on a cure.

The sale of these garbage loans to debt buyers for a fraction of their face value is probably the best news defaulted borrowers and our economy have had in twelve months. Debt buyers may be the last true free market capitalists. They operate at the street level, dealing firsthand with people in default, and have the ability and the incentive to make deals which will permit borrowers to remain in their homes.

Debt buyers take a terrible rap for their practices and collection techniques. The reputation has often been well deserved, but guess what? Collecting garbage debt is a dirty, low level, crummy line of work, but so is defaulting and losing a home. An epidemic of predatory lending and predatory borrowing, from loan inception to final liquidation, has created an ugly problem that requires repair. We should not be intimidated. As a wise man once said, “There are two rules for getting things done-get going and keep at it”.

Debt buyers offer something the lending industry cannot offer. The main problem with the big banks and loan modifications is the “you can’t get anyone on the phone”. The big lenders aren’t picking up the phone because they cannot make any money from these deals gone bad. The juice has been all squeezed out and only losses (incentive from the federal government aside) remain.

That is not the case with debt buyers. They buy these garbage loans for what they are worth. This gives them room to make deals and make money. They will call you, often call relentlessly. It is guaranteed that once a loan is sold to a debt buyer, you’ll be able to get someone on the phone.

Now is not the time to shy away from financial workouts. The sale of this debt presents a new opportunity. Borrowers must engage, fairly present their financial picture, and negotiate terms which will permit them to keep their homes and permit the debt buyer to make a reasonable profit.

Wells Fargo and all the other big banks should unload all of their bad loans on the open market. They should never have lowered themselves to taking out the garbage anyway. It is time for the marketplace to sort it all out.

Eugene C. Kelley, Esquire
Kelley & Polishan, LLC
259 South Keyser Avenue
Old Forge, PA 18518
Tel: 570-562-4520
Fax: 570-562-4531