St. Paul Tenants Unclear On Who Pays To Clean Up Bed Bug-Infested Apartments
Wednesday, March 21, 2012
A pest-control firm went through the Westminster Court
apartments last week, spraying for bugs and rodents. Tenants say
it's a hopeful sign that conditions at the dilapidated St. Paul
buildings will gradually improve.
What remains unclear to them is where the funding for that and
other cleanup is coming from. The 60-unit complex is in the midst
of foreclosure proceedings initiated by Wells Fargo, leading many
tenants and housing advocates to blame the mortgage giant for any
delays in property repairs and cleanup.
Bill Endresen, president of Impac Mortgage Holdings Inc. of Irvine,
Calif., said this week that that's not the case. His company is the
lender and servicer on the mortgage loans, and he's in close
contact with the court-appointed receiver now overseeing the
"We are the master servicer," Endresen said. "Wells Fargo is not
involved." Some housing advocates remain incredulous, and the
complicated relationship between the companies has tenants seeing
Tired of bedbugs, rodents, faulty plumbing, broken ovens and
leaking ceilings, residents at 1205 and 1225 Westminster St.
protested this month outside the downtown St. Paul Wells Fargo
branch. They were demanding the mortgage giant release more money
for property upkeep.
The buildings are overseen by a court-appointed receiver, who
relies on rents and funds from a mortgage lender to pay for
repairs. A little more than $26,000 of the $50,000 requested by the
receiver had been approved as of February, according to city
officials and court filings.
In their March 2 protest, tenants said little effort had been put
toward pest control and more money should be released faster.
Sometime on or before March 2, it was.
In an email the next day, receiver Paul Carlson, president and
chief executive of Strategic Property Services Inc., informed city
officials and housing advocates with the Minnesota Tenants
Association that "the lender has advanced approximately $62,000 for
improvements and bedbug remediation (which is underway)."
"It was amazing that the next day they authorized the exterminators
to come through," said 1225 Westminster St. tenant Nephi Anderson.
"It'd be nice to know what prompted that."
City officials have said, from their initial conservations with the
receiver, that they've been told that getting repair funds approved
by the bank is a six- to eight-week process. Tenants say that's far
Impac's Endresen said that is incorrect: "Maybe a two-week process
to get funds."
Peggy Gunn, a spokeswoman for Wells Fargo, said that despite the
protests, "Wells Fargo is not involved in releasing funds related
to the properties."
Wells Fargo and the mortgage lender are represented by the same
attorney in court, but Wells Fargo itself is not the mortgage
lender. The bank's only role is as a corporate trustee.
Endresen said Wells Fargo's role is to make "sure all the funds are
flowing through to the investors. You've got different bond
holders. They oversee that process. They're really hands-off in any
Some housing advocates disagree. "The only reason the receiver has
this job is that he was nominated, put forward and so forth by
Wells Fargo," said Peter Brown, an attorney with the Minnesota
In September, Wells Fargo initiated foreclosure proceedings on the
60-unit complex through a court action filed against property
owners Randall and Peggy Chun in Ramsey County District
Wells Fargo is described in the court complaint as the mortgage
trustee, operating in the case on behalf of Impac, the mortgage
The Chuns borrowed $2.9 million from Impac on Jan. 5, 2005, to buy
the Westminster buildings, according to the court filing, but fell
behind on the monthly $18,000 payments. They incurred more than
$6,600 in late fees by May 2011.
With interest, their debt had ballooned to $3.4 million by the time
the court action was filed in September.
In January, based on the recommendation of Wells Fargo, a Ramsey
County judge appointed Strategic Property Services Inc. of Rancho
Santa Margarita, Calif., as receiver to oversee the buildings and
collect rents. "The connection between the receiver and Wells Fargo
is extremely close," Brown said.
Brown points to language in the Jan. 13 judicial order as part of
the foreclosure hearings that says "if the property does not
generate sufficient funds to cover operating expenses, the
plaintiff shall provide funds to the receiver for the reasonable
operation of the property." In court documents, the plaintiff is
listed as Wells Fargo.
"The buck stops with Wells Fargo," Brown said.
Endresen disagrees and said his company has the biggest stakes in
the court case. "Not only are we the master servicer, but - and
this is a little unique in the commercial world - we're also what's
called the 'residual bond holder,' " he said. "We take the first
loss on the commercial bond. We're definitely motivated to get this
thing resolved and put behind us."