Repay Cohn the $14,000, readers say

I asked you to be the judge, and so here is your verdict:

We're all Stuart Cohn. We're all going down in the flames of the housing crisis.

But in the meantime, local developer Vulcan and your one-time partner Countrywide Home Loans? Give this poor guy Cohn his measly $14,000 back. Sheesh.

Well, nobody said "sheesh," exactly. But that captures the gist of roughly 300 reader e-mails, calls and Web comments responding to my column Sunday about Cohn's attempt to buy a South Lake Union condo.

"Stuart didn't get the loan offered or the condo. Tell Paul Allen to buck up and give Stuart the $14,000 himself!" read a typical judgment.

To recap: First-time homebuyer Cohn agreed to pay $276,000 for a Vulcan condo. He put down $14,000 earnest money two years ago, after Countrywide, Vulcan's preferred lender, said it had approved him for a loan.

Then, with the condo finally built, Countrywide decides it won't give him the loan after all. Though his financial situation has not changed, they say he doesn't make enough money to qualify (two other lenders agreed).

So Cohn can't buy the condo. But Vulcan says it is keeping the $14,000.

I asked: Who is to blame here? Shouldn't Cohn get his money back?

My verdict was mixed. Cohn agrees he signed a deal he probably couldn't afford. Countrywide, since sued for predatory lending, clearly backed away from a pledge. And Vulcan, which let Countrywide be its "preferred lender" in exchange for money, was by all appearances Countrywide's partner.

So I said: Split the money (which now sits in an escrow account.)

Forget that, said the vast majority of readers. All the money should go back to Cohn.

"What did Cohn do wrong?" wrote Geoff Mirelowitz, a switchman for BNSF Railroad. "Cohn may have exercised bad judgment. Maybe. But Countrywide and Vulcan definitely exercised bad business practices — and that is the least that can be said of it. If I take $14,000 of your money and never give you what you paid for, most people consider that a crime."

"My vote comes down entirely on the side of Mr. Cohn," wrote Penny Short, a former Realtor from Sammamish. "He is the amateur in this scenario, and the lender and developer are the professionals. Though they surely did not act the part."

Wrote another: "Vulcan should have the grace to admit that their cozy relationship with Countrywide was a bad idea, and that Mr. Cohn was ill-served."

Vulcan says it isn't responsible for what Countrywide did. Yes, Countrywide paid to have a desk in the Vulcan sales office, but both say that doesn't mean they were partners. Customers could use other lenders.

The reason this matters is that Countrywide is not a party to the earnest-money agreement. So while readers primarily blamed Countrywide for this mess, only Vulcan can give Cohn back the $14,000 earnest money.

Some lawyers wrote to suggest Vulcan is likely wrong that it has zero responsibility for its preferred lender. Two offered free legal help for Cohn. Other readers who work in real estate said developers typically know exactly what kind of loans the preferred, on-site lender is writing up.

"These relationships are not as neutral as the parties are claiming here," said one.

But another lawyer, Jennifer Rydberg of Kent, said that "by the letter of the law, Stuart Cohn is likely out of luck." She said the state Legislature should use Cohn's case to "write stronger consumer protection laws for real estate transactions."

A minority of readers said tough luck to Cohn because of buyer beware.

"I say, think of the $14,000 as tuition in the Seattle Game," wrote John Bailo of Kent.

Other readers said they care less about the letter of the law than the spirit.

"It seems to me this is a case of ethics," wrote Glenn Rimbey, of Snohomish. "Beneath all their posturing they certainly know that they have done this buyer wrong."

Vulcan spokesman David Postman says the company in fact goes out of its way to help struggling buyers qualify for loans. But barring that, Vulcan is entitled to the money.

"There was nothing in your column that would make us rethink our position," he said.

Fair enough. Would it help if I write some more of them?

I'm serious. Three weeks ago I wrote about how a horse farmer was denied a $15,000 loan by Banner Bank for no good reason. In normal times, that hardly rates as news. But Banner Bank got $124 million of taxpayer bailout money.

We all now own a slice of Banner Bank — and of practically every bank. As we've painfully learned, what banks and private financial firms do is now very much the public's business.

(After that column ran, Banner Bank reversed its decision and granted the loan.)

A number of readers pointed out we own a big slice of Countrywide, too. It's part of Bank of America, which has gotten $45 billion in bailout money.

Think about that. Stuart Cohn is not only out his life's savings. But as a taxpayer he now has to bail out the very company that shafted him.

Surely there's a better way to settle this — this case and this entire economic mess we're in — than by sticking it to the people who have nothing. Twice.

Danny Westneat's column appears Wednesday and Sunday. Reach him at 206-464-2086 or dwestneat@seattletimes.com.