Dirty Deeds
I attended seminar last week dealing with Short Sales. During the seminar the conversation eventually wandered to the topic of foreclosures and things foreclosed property owners can do. She told of borrowers who put bags of concrete down the drain just before they vacate their homes. The dry mix turns hard after a few days and the bank gets a huge mess. And her story reminded me of my own experiences and dirty deeds that I encountered during my years in banking. Here are a few:
Paper Widow: the widow of a major Denver newspaper publisher refused to pay her loan to the bank. I commenced foreclosure on her very expensive home. She called the president of the bank and asked him to intervene. I got called to his office and explained how far delinquent she was and that she refused to pay anything. I related how she told me she would drag our bank's good name down on the front pages of the paper. I was told to continue. Then I got a phone call from her son with whom I went to law school. He said his mother was "nuts" and asked for a small delay so he could repay the loan. I agreed and the loan was repaid.
Mr. Green the Vet: a Viet Nam paraplegic had a home loan that funded renovations to a 1960's era ranch home to make it suitable for the wheelchair bound vet. He refused to repay the loan, or any part of it. He threatened to go to the news media and plead his case about the big bad bank taking his home. I told him he had to repay the loan and could not live there for free. He dared me, and I foreclosed. When we got the house this person had managed to remove all the kitchen cabinets, appliances, all light fixtures, light switches and plugs, all bathroom fixtures except the toilets which were filled with ****.
Your the meanest man I ever met: I foreclosed on the house of a former bank co-employee (I did not know him). His wife cleaned her southeast Denver home so that it would shine and no one would think ill of her. But as she handed me the keys to her home she told me that I was the meanest person she had ever met. I had not made the loan to him, and I had tried to figure out a way to help him find a way to get it re-paid. But things did not work out.
I hate you Gary Thomas: we had a huge loan to a farmer in Western Kansas. He had several square miles under cultivation. He had loans with several different banks, but we had the mortgage on the home place, the barns, several sections (square mile sections of farm land), and UCC liens on his farm equipment. When he reneged on paying his debts, we started foreclosure. We held an auction on the home place and sold all of our collateral. Now the borrower had managed to keep his Beechcraft Bonanza away from my clutches along with some other toys. But his wife blamed the loss of the family farm on me instead of him.
Political Ever-Green Loans: big banks make "evergreen" loans to politicians. An Evergreen Loan is a loan that is continuously financed by the lender rather than repaid. No Clean-Up requirements are usually associated with Evergreen Loans, meaning there are no contractual obligations requiring periodic payments on the outstanding debt. Typically made under specific terms, it is also a de facto condition in renewing short term loans, where the loan is renewed without any reduction in the principal amount. They were made to both political parties and to the highest elected officials in the state. I filed suit against the former director of the regional transportation district, the former lieutenant governor, the former director of the Denver Symphony, you get the picture. My experience was that lots of politicians like to use other peoples money for their own ends. Just you try to get one of those loans. I dare you.
I feel the earth move under my feet: I foreclosed on single family home at the base of Lookout Mountain just west of Denver. Lenders usually don't get to see the inside of a property prior to foreclosure so the banker uses his best judgment to decide how to handle each case. This foundation of this house was also a retaining wall for the mountain and the foundation had slipped and caused the house foundation to shift downward. I was able to trade the banks interest in this house for another property without any structural problems and everyone ended up okay in the end. But that was pure luck.
California One Action Rule: a California resident and borrower had borrowed money from our Colorado bank. He defaulted on loan and we foreclosed our security interest on the loan (a hotel in Palm Springs, Ca.). But we had a deficiency amount still owing so we sued our borrower in Denver District Court. He appeared and defended. We got judgement. He appealed and the Colorado Supreme Court upheld our judgment citing language in our loan documents stating that Colorado law would govern the documents and transactions. I then sued him in California to enforce our foreign judgment. He defended and lost. I remember the California Supreme Court ruling stating that we did what seemingly could not be done under California law: we got two shots at the apple so to speak. He got clever and bought a house in Coos Bay, Oregon. I sued and foreclosed his interest in the house.
The borrower was a former attorney who thought he could use his wiliness to avoid paying his debt. He lost.
The Usual Suspects: our borrower was a home builder who defaulted on loans to several big banks. He did not pay a lot of subcontractors, and he had lots of enemies. He and his wife divorced. I was convinced that the divorce was a sham. I later learned it was anything but a sham. I got an anonymous phone tip that he was going to receive $100,000 in cash on a Friday at his attorneys office in Lakewood, Colorado. I had our outside counsel get a writ of execution issued and got the sheriff to appear at the attorneys office on the day and time. Sure enough the money was there and the sheriff took it. Our borrower went ballistic. No one ever did that to him before. We spent 4 or 5 days in court arguing over what we did, but we won. A few months later the cover story in WESTWORD, a Denver weekly newspaper, was about the murder of our borrower and the discovery of his body at the Cherry Creek Reservoir. My bank was the only lender to get any money out of this crooked builder.
The Crying Game: another attorney I knew from my days practicing law became the owner of a bunch of industrial banks in the Denver metro area that were known as the Presidential Banks because each bank was named after a former President. The attorney borrowed money from several commercial banks in Denver including ours. He defaulted. He made a quick trip to Florida where he got a drivers license, registered to vote, bought a house and declared his homestead. He returned to Colorado and filed Chapter 11 Bankruptcy. We took him to task and objected to the fraudulent bankruptcy filing. We had him in tears on the witness stand during one of the hearings. He eventually found some money he forogt he had and paid us off.
I didn't inhale: a Mexican national pulled a big kite on our bank--about $500,000 in 1982. I got a prejudgment writ of attachment on his penthouse condo that he owned free and clear in Vail. The court appointed me a receiver for the property, and I took an itemized inventory of all personalty found in the unit--including a stash of marijuana. Later we entered into a settlement with him through his attorneys and got ownership of the condo and the contents. But the attorney made sure to disavow any ownership of the marijuana that was listed in the inventory filed with the court. We sold the condo very quickly. All cash. Total recovery of our loss.
My favorite story is about the REO I called Cujo Oreo. READ IT HERE.
Borrowers do some crazy things when they cannot repay loans or unsecured debt. I found it much easier to deal with people who were open and honest when they fell on hard times. I was even able to get my bank to lend new money to good people if they had a way to use it to earn money to pay us back. It worked on several occasions. But most borrowers get scarred and run away and hide or blame their banker for their woes.
