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One day, more than three years ago, Suzanna Wertheim lost her job as a hospice nurse and learned she had terminal cancer. To cover chemotherapy and other health costs, she dug into her savings and unemployment benefits and quickly fell behind on paying the mortgage for her three-bedroom home in Oakland, Calif.
I first wrote about Wertheim for the investigative reporting newsroom ProPublica in August 2010, when she was on the brink of foreclosure. She described the year and a half she had spent trying to get Wells Fargo & Co. (WFC) to modify her loan as “Kafkaesque,” an endless runaround of lost documents and mixed messages that many struggling borrowers know all too well. As the process dragged on, Wertheim kept accruing fees and falling further behind.
After the story ran, The Rachel Maddow Show interviewed Wertheim and within days, Wells Fargo offered her a modification that lowered her monthly payments to something she could afford. When I caught up with Wertheim at the end of 2010, she said it was a “godsend” to have peace of mind, knowing she wouldn’t be forced out of her home in her final days—which she knew were numbered after her cancer spread to her spine, cervix, and brain. A few months later, in March 2011, Wertheim died at age 50, leaving her home to her three kids.
The three-bedroom house is about 2,200 square-feet, “a whimsical tree house with a view,” says Rebeccah Wertheim-Knapp, the middle child. None of the kids were living there, so Wertheim’s eldest daughter, Kaiya, began figuring out how to sell it. They put it on the market last June, asking $664,000. Almost no buyers expressed interest. In December, they brought in a new realtor team and lowered the price to $575,000. One of their realtors, Devin Ratoosh, says hundreds of people looked at the house, but none made an offer. After lowering the price to $475,000, they got one promising bid—an all-cash offer for $450,000.
If it had been up to them, the three would have accepted the offer immediately. But it’s not. That’s because the mortgage debt on the house exceeds $535,000, so—like the properties of one in five homeowners nationwide—it is underwater. The Wertheims needed Wells Fargo to approve a short sale, by which the home is sold for less than what’s due on the mortgage. The bank rejected the request for a short sale, saying it valued the home at $675,000, an amount Ratoosh calls an “obscene unrealistic valuation.” He says Wells Fargo wouldn’t entertain a challenge to the pricing, including a report showing $60,000 of termite damage to the home.
Wells Fargo spokeswoman Vickee Adams says that under the valuation the bank made, the offer was too low. Adams says Wells Fargo did a drive-by appraisal; from the curb, the property “looked well-cared for,” so the bank assumed the house was occupied. That assumption ended up dinging the Wertheims because it’s easier to get short sales approved when a home is vacant, Adams says. The drive-by valuation also didn’t take into account such internal problems as the termite damage. Adams says the bank will re-examine the appraisal.
Short sales usually fetch more money than foreclosures, according to Lender Processing Services (LPS), a Florida company that handles defaults for mortgages lenders. The average foreclosure is discounted 29 percent, while a short sale typically goes for only 23 percent less than a comparable non-distressed home. Only recently have short sales begun picking up.
The Wertheims hope to be part of this growing trend. They could let the home go into foreclosure—financially, it wouldn’t make a big difference—but it takes about a year to process foreclosures in California. Wertheim-Knapp, who works 50 hours a week as a nanny and has no savings, hopes she and her siblings can move on. “It would be nice if everything just finally stopped,” she says.