2.12.10
The following I am still investigating and will run by some attorneys and real estate agents I know. For now, I will present this info and let you make your own judgment. Also I’d like to thank one of Bill Fleckenstein’s readers for passing on the following important information:
Potentially a disturbing bit of investigative work done by AZ real estate agent Robert Hertzog in his article “Is the FDIC Killing Short Sales” – according to him, and with a document from the FDIC to back it up, OneWest bank, which took over the portfolio of the failed IndyMac bank, has a deal with FDIC that states that the FDIC will cover 80%-95% of OneWest’s loan losses, making it more profitable for them to foreclose than to sell the house on a short sale – and to effectively TRANSFER MORE LOSSES FROM THE BANKS TO THE TAXPAYER. Apparently, increasing voter angst is accomplishing little and therefore, perhaps the heat needs to be turned up. Here is a tidbit in his words:
“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). 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: For any residential mortgages where OneWest experiences a loss, the FDIC will step in and cover anywhere from 80%-95% of the loss. The loss is calculated using the ORIGINAL LOAN BALANCE, not the amount that OneWest paid for the loan. 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? The net loss, according to the FDIC formula is the ORIGINAL LOAN AMOUNT minus the amount of the offer. In this case, $485,200-$241,000, or $244,200. Next, the FDIC, according to their Loss Share Agreement, writes a check to OneWest for 80% of the so-called “net loss”. 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. Remember, OneWest paid $334,600 for the loan. So, OneWest puts $101,760 in their pocket, thanks to the FDIC. Folks, that is over $100k of our hard-earned tax dollars!”
There is more to this including the intriguing group of investors behind OneWest. To read more, see Robert’s article here:
I am digesting the FDIC document linked in the article so I can not say for sure exactly how this works due to my limited legal background:). I will offer it here to you to investigate yourself. Either way, however you interpret this, since this is an FDIC program, this meets the implied approval of the President and likely many in Congress. If , therefore, you don’t like it, speak up – please.
