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| -Lurid Crime Tales- |
| Anatomy of a Government-Abetted Fraud: Why Indymac/OneWest Always Forecloses |
| 2009-12-03 |
| Several times per week, I get phone calls from attorneys. These calls all start out the same. "I am unable to get loan modifications done through a lender. What can I do?" The first question I ask is if the lender is Indymac/One West. Invariably, it is. I also field the same type of calls from homeowners and from loan modification companies. Everyone is having the problem of Indymac not cooperating with regard to doing loan modifications. Furthermore, if I google the issue or check out loan modification forums, the same is true on the internet. What is going on with Indymac/One West? Why aren't they doing loan modifications? This article will try and bring together the known facts for a better understanding of the situation, and discuss what the Indymac situation means for foreclosures in general -- and the government's response to the crisis. First, to understand the situation today, one must have an understanding of the recent history of Indymac. History Indymac was a national bank in the U.S. It was insured by the FDIC. On July 11, 2008, Indymac failed and was taken over by the FDIC. Indymac offered mortgage loans to homeowners. A large number of these loans were Option ARM mortgages using stated income programs. The loans were offered by Indymac retail, and also through Mortgage Bankers would fund the loans and then Indymac would buy them and reimburse the Mortgage Banker. Mortgage Brokers were also invited to the party to sell these loans. During the height of the Housing Boom, Indymac gave these loans out like a homeowner gives out candy at Halloween. The loans were sold to homeowners by brokers who desired the large rebates that Indymac offered for the loans. The rebates were usually about three points. What is not commonly known is that when the Option ARM was sold to Wall Street, the lender would realize from four to six points, and the three point rebate to the broker was paid from these proceeds. So the lender "pocketed" three points themselves for each loan. When the loans were sold to Wall Street, they were securitized through a Pooling and Servicing Agreement. This Agreement covered what could happen with the loans, and detailed how all parts of the loan process occurred. Even though Indymac sold off most loans, they still held a large number of Option ARMs and other loans in their portfolio. As the Housing Crisis developed and deepened, the number of these loans going into default or being foreclosed upon increased dramatically. This reduced cash and reserves available to Indymac for operations. In July, 2008, the FDIC came in and took over Indymac. The FDIC looked for someone to buy Indymac and after negotiations, sold Indymac to One West Bank. OneWest Bank and its Sweetheart Deal OneWest Bank was created on Mar 19, 2009 from the assets of Indymac Bank. It was created solely for the purpose of absorbing Indymac Bank. The principle owners of OneWest Bank include Michael Dell and George Soros. (George was a major supporter of Barack Obama and is also notorious for knocking the UK out of the Euro Exchange Rate Mechanism in 1992 by shorting the Pound). When OneWest took over Indymac, the FDIC and OneWest executed a "Shared-Loss Agreement" covering the sale. This Agreement covered the terms of what the FDIC would reimburse OneWest for any losses from foreclosure on a property. It is at this point that the details get very confusing, so I shall try to simplify the terms. Some of the major details are:
OneWest would purchase Line of Equity Loans at 58% of the current balance. In the event of foreclosure, the FDIC would cover from 80%-95% of losses, using the original loan amount, and not the current balance. How does this translate to the "Real World"? Let us take a hypothetical situation. A homeowner has just lost his home in default. OneWest sells the property. Here are the details of the transaction: The original loan amount was $500,000. Missed payments and other foreclosure costs bring the amount up to $550,000. At 70%, OneWest bought the loan for $385,000. The home is located in Stockton, CA, so its current value is likely about $185,000 and OneWest sells the home for that amount. Total loss for OneWest is $200,000. But this is not how FDIC determines the loss. 'FDIC takes the $500,000 and subtracts the $185,000 Purchase Price. Total loss according to the FDIC is $315,000. If the FDIC is covering "ONLY" 80% of the loss, then the FDIC would reimburse OneWest to the tune of $252,000. Add the $252,000 to the Purchase Price of $185,000, and you have One West recovering $437,000 for an "investment" of $385,000. Therefore, OneWest makes $52,000 in additional income above the actual Purchase Price loan amount after the FDIC reimbursement. At this point, it becomes readily apparent why OneWest Bank has no intention of conducting loan modifications. Any modification means that OneWest would lose out on all this additional profit. |
| Posted by:logi_cal |
| #2 George Soros is making big bucks on this, so it looks like it's a payback by Obama. I wish that that could be proven. |
| Posted by: Oregon Doodle 2009-12-03 15:36 |
| #1 sounds illegal |
| Posted by: 746 2009-12-03 14:22 |