As some of you already know, I blogged recently about being interviewed recently by our local NBC news affiliate. Â To read the blog,Â click here. Â Basically, IndyMac Bank (now OneWest Bank), is holding one of my clients hostage, demanding a $75k promissory note, or they will proceed to foreclosure. Â For the life of me, I couldn't figure out why they were doing this. Â The BPO came in at the contract price of $275k, with a net to IndyMac of $241k. Â What advantage could there possibly be for them to proceed to foreclosure?
Yesterday, I figured it out. Â You see, IndyMac was taken over by the FDIC and sold to OneWest Bank in March/2009. Â Guess who the investors are behind OneWest? Â George Soros, Michael Dell, Steve Mnuchin (former Goldman Sachs executive), and John Paulson (hedge-fund billionaire).Â Â
Now, listen to the deal they got from the FDIC....
Basically, they purchased all current residential mortgages at 70% of par value (70% of the outstanding loan amounts). Â They purchased all current HELOCS at 58% of Par Value!!!
Next, in order to "sweeten the pot", the FDIC stepped in and guaranteed the following: Â For any residential mortgages where OneWest experiences a loss, the FDIC will step in and cover anywhere from 80%-95% of the loss. Â The loss is calculated using the ORIGINAL LOAN BALANCE, not the amount that OneWest paid for the loan. Â Let's use my clients situation as an example:
Loan Amount is $478,000, plus 6 months of missed payments, for a grand total of $485,200
OneWest pays $334,600 for the loan
We have an all cash offer of $241,000, net to OneWest.
So, let's do the math, shall we? Â The net loss, according to the FDIC formula is the ORIGINAL LOAN AMOUNT minus the amount of the offer. Â In this case, $485,200-$241,000, or $244,200. Â Next, the FDIC, according to their Loss Share Agreement, writes a check to OneWest for 80% of the so-called "net loss". Â So, in this case, OneWest gets a check from Uncle Sam for $195,360 (.80 X $244,200).
Add the $195,360 to the sales price of $241,000, and you get a grand total of $436,360. Â Remember, OneWest paid $334,600 for the loan. Â So, OneWest puts $101,760 in their pocket, thanks to the FDIC. Â Folks, that is over $100k of our hard-earned tax dollars!
So, you ask...Why does this program hurt short sales? Â Because, our brilliant government offers this SAME PROGRAM FOR FORECLOSURES! Â The only difference is, the government picks up 80% of the tab on all of the extra costs associated with a foreclosure (BPO's, upkeep, utilities/maintenance, legal fees, etc.)
So, If I'm OneWest, why would I want to waste my time negotiating through a Short Sale, when I can make the same amount of money (if not more) by just letting it go to foreclosure? Â And we wonder why nobody can get a Loan Modification? Â Why would OneWest approve a loan modification for this guy, when they can foreclose and make over $100k? Â And, to add injury to insult, they have held this loan for 6 months! Â Not a bad ROI, huh?
What infuriates me the most is that in my particular case mentioned above, they have the guts to hold my client hostage for a $75k promissory note, after they are already making more than $100k on the sale!!! This is his primary residence, 1st Position loan, and OneWest has NO RECOURSE! Â Imagine if they could make $100k, then get a deficiency judgement! Â Talk about making some big bucks!
Can you say "GREED"?
The scary thing is that over 50 banks have Shared Loss Agreements in place with the FDIC. Â Some of them include: Â Bank of America (go figure), CitiMortgage, Wells Fargo, etc. Â
This entire agreement between the FDIC and OneWest can beÂ found here, on the FDIC website. Â It's all there, for the world to see! Â They have it all layed out. Â All of the formulas, worksheets, etc. Â
Now, it's up to us to bring it to the attention of our elected officials and the media. Â Enough is Enough!Â
UPDATE: Â I JUST READ AN AWESOME ARTICLE ON THIS VERY TOPIC, THAT GOES INTO MORE DETAIL ABOUT THE PROGRAM. Â CLICK HERE TO READ IT.