Bank receives bailout then bails

Frank Cerabino

Saturday, Sept. 8, 2012 | 2 a.m.

Alan Meltzer has a fantasy about walking into a Wells Fargo branch and making a dramatic announcement.

“I’m here to collect,” he imagines himself saying. “Give me your cash registers.”

Meltzer isn’t a would-be bank robber. He’s a condominium president who has turned the tables on one of America’s megabanks.

“We bailed out Wells Fargo, then Wells Fargo bailed out on us,” he said.

“Us” in this case is the Forest Condominium Association in suburban West Palm Beach, Fla. The Forest condominiums are a sterling example of the damage caused by the overheated housing market and the lending practices that precipitated its collapse.

Eleven years ago, when Meltzer bought one of the 140 units in his community — a modest, working-class neighborhood of 800-square-foot units arranged in four-plexes — the going price was about $45,000.

By 2005, those same units were selling for at least $150,000, and seemingly on an endless climb.

“It was nuts,” Meltzer said. “Everyone here was getting $180,000 mortgages. People who barely had jobs. It was craziness.”

When the housing bubble burst, it sent unit prices at the Forest tumbling to new lows.

“Now, they’re going for about $28,000,” Meltzer said.

The collapse led some six-figure mortgage holders to abandon their homes. One of them was the owner of a unit who moved out of his condo with an unpaid $197,000 Wells Fargo mortgage. The bank eventually foreclosed and took ownership of the empty condo last year.

But unlike other condo owners, the bank never paid the $260 monthly maintenance fees to the association. And to make matters worse, the physical condition of the bank’s empty condo deteriorated.

“We warned them,” Meltzer said. “There was a mold issue in there, and they needed to resolve it. It was coming from a drip from the washer-dryer hookup.”

But nothing happened, so the association went ahead on its own to fix the mold problem in the bank’s unit.

“We had to gut the apartment,” Meltzer said. “It was a big job. They had to go in with hazmat suits.”

The condo association filed a lien against the bank, estimating that the mold repairs and the accumulating monthly maintenance fees owed by Wells Fargo to the condo association were $23,210.

“They let the place go to hell, and then when we asked for the money, we didn’t hear anything more from them,” Meltzer said.

So the condo association took the next step, foreclosing on the bank’s condo.

“We treated them just like we would treat any other owner in the community,” Meltzer said.

In July, the condo association became the owner of the gutted unit, which in its present condition isn’t worth as much as its outstanding maintenance and repair bills. To remedy that, the association can pursue something called a “deficiency judgment” against the bank, which would pay for the repairs.

“I’m going to do this,” Meltzer said. “We are a poor community. We don’t have money. This isn’t a clash of the titans. It’s just little us. But the banks are going to learn.”

Meltzer keeps hearkening back to the financial collapse of 2008 and the bailout of the country’s biggest banks, including Wells Fargo, which received, and later and repaid with interest, $36.9 billion of taxpayer money.

“The irony is unbelievably delicious,” Meltzer said. “After we bailed them out, now they’re the ones who are walking away.”

Frank Cerabino writes for the Palm Beach Post in Florida.