BILLIONS MADE AS HOUSING GOES DOWN UNDER SWEETHEART FDIC LOSS SHARING DEAL

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EDITOR’S COMMENT: On the IndyMac portfolio alone, they made billions while the investors and homeowners got crammed down with double-talk about where the money went. I have been saying for years that there is far more money to be made by banks, servicers, Wall Street insiders and investors by foreclosing than by modifying.

Despite hundreds of thousands of applications where the offer from the borrower was far better than the apparent results from foreclosure, they were turned down without a single thought. Why? Because the FDIC is paying off the losses and there is the nub of the question: When will the Federal Government stop encouraging foreclosures when the entire country is in crisis because of the foreclosures?

This FDIC-Sponsored Scheme Lets Loss-Share Lenders Get Rich Off Foreclosure

Mike “Mish” Shedlock

Mike “Mish” Shedlock Mish is an investment advisor at Sitka Pacific Capital. He writes the widely read Mish’s Global Economic Trend Analysis.

A couple of readers asked me to comment on the Sun Sentinel article Are loss-share lenders gouging us?

November 27, 2011

In the wake of the recent real-estate meltdown, the borrower of a nonperforming loan called his lender with promising news: “I have a buyer looking to make an all-cash offer for my Florida property. Will you meet with us tomorrow?” The lender’s answer: “No.”

Disturbingly, this implausible response is not uncharacteristic of lenders who exploit FDIC loss-share agreements by seeking to foreclose on nonperforming loans, even when prudent business judgment calls for short sale or loan modification solutions. By perverting the terms and spirit of loss-share agreements, these lenders are reaping windfalls while prolonging the foreclosure crisis, depressing real-estate values and sticking taxpayers with the bill.

FDIC Sponsored Fraud

Rather than comment directly, I asked Patrick Pulatie at LFI Analytics to chime in. Pulatie writes ….

I wrote an article about IndyMac and the Shared Loss Agreement (SLA) two years ago, before I quit working with most homeowners. Essentially, here is what is going on.

Shared Loss Agreements were executed by the FDIC with the banks that took over failed institutions. Some had the terms that the author describes. Others did not have the same terms, and were much more restrictive. The author is referring to the Shared Loss Agreements similar to OneWest Bank/IndyMac, which I wrote about.

The SLA for OneWest Bank worked in the following manner:

• It only applied to the Portfolio Loans being purchased. It did not apply to servicing rights. 1st Mortgage Loans were purchased for 70% of the original balance. Second Mortgage Loans were purchased at a much lower rate, at 55% or lower at times. I shall only mention First’s from here on out, but Seconds apply as well.

IndyMac had a large portfolio of Neg Am loans, so the 70% purchase price of individual loans might be “lower” if the loan had accrued a Neg Am balance above the original loan amount. If there were a large number of 30 year fully amortized loans, then there might be a greater than 70% purchase price. There is no way to break down the proportion of each.

• The first 20% of losses on the “Total Portfolio” purchase would be absorbed by OneWest Bank. There would be no reimbursement on those losses.

• The next 10% of losses, up to 30%, are reimbursed at 80%. So to begin to make claims, the 20% level must be reached.

• From 30% on, the reimbursement rate is 95%. But the 30% loss level must be reached before the 95% can be claimed.

• The total purchase of Portfolio loans was approximately $12.5 billion, so a 20% loss would be $2.5 billion before claims could begin.

• If every single loan (first mortgage) had defaulted on the first day of purchase, and after reimbursement, the agreement, every $.70 spent would have resulted in $.745 being returned. Not bad! But that is not all.

Most of the loans were not in default. Therefore, interest would continue to be earned until the loan refinanced, or defaulted, so they were making a profit, and as their filings have shown, they made very good profits on these loans.

As you can see, it is always in the best interests of OneWest Bank to foreclose on defaulted properties. The sooner that the 20% loss is reached, then the quicker that they can make claims for reimbursement.

Has OneWest Bank reached the 20% threshold? That has not been announced. However, it has been 2.75 years since the Shared Loss Agreement went into effect in March 09. One would think that the 20% level has been reached.

In Feb 2010, a person I know claimed to have seen the paperwork on one loan showing that reimbursement had occurred on that loan. I did not see the paperwork, but since this person did the Good Bank/Bad Bank scenario for the FDIC in the early 90’s, I have to accept that he knew what he was looking at.

Who Benefits: George Soros, Michael Dell, John Paulson

Pulatie referred to an article he wrote on December 1, 2009: Anatomy of a Government-Abetted Fraud: Why Indymac/OneWest Always Forecloses

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 all first mortgages at 70% of the current balance
  • 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.

Meet IndyMac’s New Owners

Flashback March 20, 2009: IndyMac Bank’s new name: OneWest Bank

The sale of IndyMac Federal Bank was concluded Thursday, and the new owners wasted no time in ditching its tainted name. Starting today, IndyMac is OneWest Bank.

The Pasadena bank’s new owners, organized under OneWest Bank Group, bought the bank’s $20.7 billion in loans and other assets for $16 billion. That includes $9 billion in financing from the Federal Deposit Insurance Corp. and the Federal Home Loan Bank.The ownership group is led by Steven Mnuchin of Dune Capital Management in New York. The bank’s investors include J. Christopher Flowers, who has specialized in distressed bank purchases, and hedge fund operators George Soros and John Paulson.

Check out the last line and primary lie in the above article:

The management team has been working with the FDIC on a loan modification program to attempt to keep people in their homes.

OneWest bank profit: $1.6 billion

On February 20, 2010, the Los Angeles Times reported OneWest bank profit: $1.6 billion

The billionaires’ club of private financiers who took over the remains of IndyMac Bank from the Federal Deposit Insurance Corp. turned a profit of $1.57 billion last year on the failed mortgage lender — more than they invested less than a year ago.

Yet under the sale agreement, the federal deposit insurance fund still could lose nearly $11 billion on bad loans that the Pasadena institution made before it was sold last March and renamed OneWest Bank.

In taking over IndyMac’s assets, the investor group, led by Steven Mnuchin of Dune Capital Management, put up $1.55 billion to revitalize the bank. Other investors included hedge-fund operators George Soros and John Paulson, bank buyout expert J. Christopher Flowers and computer mogul Michael S. Dell.

OneWest’s financial results were filed with regulators Friday. Regulators and the investors declined to comment on the profit.

As much as $11 billion is set to go straight into the hands of the desperately needy: George Soros, John Paulson, Michael Dell, and Christopher Flowers. The regulators and the investors parasites declined to comment.

Boycott Dell

If you are thinking about buying a new computer, and you are considering Dell, you may wish to reconsider.

Mike “Mish” Shedlock
http://globaleconomicanalysis.blogspot.com
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27 Responses

  1. I FEEL YOUR PAIN :it is in the best interest of the Indy Mac investors to say no to their customers. They have a sweet heart deal with the FDIC. Yes our government has taken care of these billionaires while Average Joe on Main Street flounders.

    Information can be found all over the internet which confirms Soros and Dell purchased the failing Indy Mac Bank from the FDIC who had taken it over when Indy Mac’s reserves fell below the legal amount. Soros and Dell bought the bank for $20.7 billion. The bank’s assets at the beginning of this year (2009) totaled $23.5 billion. They made $3.5 billion immediately at the time of purchase.

    The deal with the FDIC also has a loss sharing agreement with a 20/80 split. Soros and Dell take the first 20% hit of any loss and the FDIC picks up the lion’s share of the balance.

    I am trying to figure how this plays out in my personal situation. If Indy Mac forecloses on my loan and I owe $603,000 does this mean Soros and Dell only get stuck with a loss of $120,600 and the FDIC takes care of the rest? Indy Mac will own the house which as of today is still valued around $750,000. Does Indy Mac then sale and make a profit? WTF is this?

  2. IndyMac bank fsb bankrupt on 2008,how IndyMac venture llc and private insurance company (fdic) become beneficiary of lost assets 0n 2009 ,and call themselves lender ,is this legal ,and government approve it or ????????????

  3. IndyMac ventures llc assigned a substitute trustee for my property,and claim they are my lender ,because they open a joint account with FDIC 2 YEARS AFTER I OBTAIN MY CONSTRUCTION LOAN FROM INDYMAC BANKS FSB,AND ONE YEAR AFTER INDYMAC BANK FSB BANKRUPT.THIS IS MY QUESTION BY LAW CAN THEY CALL THEMSELF LENDER ,AND ACT AS A LENDER ,OR A LENDER HAS TO PROVE TO COURT ,OR GOVERMENT THEY ARE A REAL LENDER.AND HAVE RIGHT TO THE PROPERTY ,AND MONEY AND PROFIT AFTER FORCLOSURE.

  4. I DONOT HAVE MORTGAGE LIEN ON MY PROPERTY ,CAN INDYMACVENTURE LLC FORECLOSUE MY PROPERTY

  5. I never bought any thing from IndyMac venture llc.can they foreclosue my house???????//

  6. a collection agency wants to foreclosue my house ,and got a certified letter from IndyMac venture llc.jeani Caldwell .without having notes.my original loan was country wide home loan ,construction loan IndyMac F.S.B 2007 ,and one west bank took my construction loan without any notes ,and deed .2008.what documents IndyMac venture llc.and collection agency should present in order by law to be coalify to foreclosure my house.

  7. marilyn lane,

    Not up to plaintiffs to prove criminal forgeries. This is up to the US government. If US government fails to do their job, courts assume no wrong doing. Up to the US government.

  8. Gregory Bryl, Esq.,

    No — get the government back in the business of regulation. All was lost by deregulation. Government has protected deregulation for years. Big question is — WHY????? Donations??

    Deregulation – avenue of fraud. Courts are unaware or compliant. But, not forever.

  9. carie

    read this case maybe you can get one up on the court
    Scholar Alert: [ forged deeds ]; Federal cases

    Tilley v. AMPRO MORTGAGEDist. Court, ED California, 2011
    … her claim that the chain of title is convoluted, that MERS does not have any authority to act in
    connection with the deed of trust … dismiss, plaintiff particularly relies on the fact that Deborah Brignac

    signed three of the documents in the chain of title and suggests this shows forgery

    (The court shot her down on almost everything …)

  10. When will people wake up? Including OWS?.. Government subsidies, even general, always screw the public. Government subsidies raise prices, not lower them, thus screwing the very intended beneficiaries.

    This loss-sharing agreement is but a drop in the ocean of government’s voluntarily enslaving itself to the financial sector. Parasitic finance, including MBS, was enabled by the government from the get-go. Market risk would have kept risk-takers in check, but the government took that risk away through its guarantees. Get the government out the “business” of guarantees and subsidies. To add insult to injury, the government then bailed out even those sectors of parasitic finance that didn’t have government guarantees.

    Fallible people will always choose the most profit for each hour of their work. So people will always use the revolving door of GovernmentWall-Street to enrich themselves quickly at the expense of the taxpayer. It’s the system that needs to be changed. The government system.

    It is pointless to try to prevent people (through regulation, etc.) from seeking the most profit. Rather, we need to limit the size and power of the government to such an extent that Wall Street will no longer look to the government as a source of profit.

  11. I am defending a One West Foreclosure, with counter claim. i have read every portion of the Silo transaction and having worked on Wall Street and in mortgage banking – it was kinda of a no-brainer. Forhet the March sale. Look past that to the OTS to see the Trust set up behind the whole thing and where eventually IMB Holdco funnels the monies they receive from one west ventures. First and foremost, IndyMac Federal Bank, FSB still own the majority of the loans and they all sit on MERS under that name since that is the actual last transfer. The construction and land loans are still held at IndyMac Venture LLC, which is still owned by the FDIC. The FDIC sold their interest in all the loans to the intermediate holding company, One West Ventures. thde only thing Mr. Mnuchin purchased was the interest in the majority of all the mortgage loans held the receiver bank.

    Ultimately, all the profits are funneled through to the Trust registered with the former OTS, a/k/a Dochow’s House.

    Finally, the FDIC is a private insurance company established merely to keep the assets leveraged and the fractional banking system moving along, or keeping the money in the game, They wipe out the shareholders and debt holders of the bank holding company and strip the assets out and leave an empty shell behind. The losses get socialized through the Federal Reserve Corp, liquidity program,story for another day.

    I just started discovery and they refuse to send any documents. I filed a motion to compel and they are now seeking to depose. My ego tells me to allows depositions, but my heart says stand your ground and refuse until they complete the discovery request.

    Iin any event, just remember the name George Alexander.

  12. What part of human beings (and their family pets), made homeless by fraudulent debt collectors is legal, moral, or ethical? No part.

  13. Oh yeah — also, insurance fraud.

  14. tony

    Thank you!!!!!! Quote — “In truth they only purchased Indymac Federal assets which was just the right to service.”

    The Indymac “loans” were only collection rights to start with on fabricated GSE defaults or rejects.

    I know I have not used the term qualified vs non-qualified contracts. But, the loans themselves were not mortgages. Thus, they were non-qualified contracts that only transferred collection rights servicing on GSE defaults/rejects to Indymac (and many other “financial” institutions). Only reason FDIC got involved with Indymac is because they went bankrupt and were FDIC insured.

    What the FDIC did was to support transfer of Indymac (fraudulent) debt collection (buying) “rights.” Straight from the words of former Fed Chairman Alan Greenspan (paraphrase) — “the distressed debt buyer serves a big purpose.” Guess he meant to line the pockets of the likes of debt buyers including hedge fund honchos.

    Let the truth be told. Debt collection fraud is massive.

  15. Don’t let them say anything, just pull the IMB Holdco and Indymac Ventures LLC agreement and send it to them. Also with the DBNTC vs FDIC case. Then ask them why is DBNTC asking for damages due to them not having access to any trust funds.

    Then ask who are Onewest working for since the only servicing agreement they have is with the FDIC?

    Also ask them why is MBIA the insurance company for some of the “Indymac trust”, is stating because of the FDIC taking and assets and splitting the liabilities thus making Indymac Federal and then selling “servicing” to IMB Holdco they say that people now do not have to pay there3 mortgage?

    These are questions people must ask and get answers. Too many home owners are trying to use the same old thing posted on blogs and lawyers filing the same ol thing because of them. Start attacking Onewest with its own deal with the FDIC. They can not lie or get around it with any legal talk nor can a judge sidestep it with well all that matters is that you didnt pay.

    Once people start using DBNTC vs FDIC and MBIA vs FDIC you will see that Onewest lack jurisdiction in any court matter nor do they have the right to do joiner rule either. Since the FDIC deal with Onewest is clear do you can not join anyone or and if you try it will be void.

    The FDIC even states in the agreement that they will not verify if any paper work is correct and that they are buying this at there own risk.

  16. Chevy Chase Bank/Capital One?

  17. Thanks, Tony.

    I asked the Indymac/OneWest “default escalations” servicer point blank:
    “Are/were my payments going to Indymac Ventures LLC? Is that also the entity that would get the proceeds from the theft/sale of my property?

    He said he’s “researching” the answers…

    But—if he says YES—wouldn’t that admission be proof that they cannot legally foreclose?
    Of course I’m sure he will ultimately give me some obfuscating answer..

  18. Carie,

    Yes the Indymac Ventures LLC is a “collections account” for any account Indymac Federal “serviced”. As been stated before read DBNTC vs FDIC case and all you answers will be answered. The trust never had a QFC (qualified financial contract) meaning anything securing a mortgage loan. Instead a non QFC just a contract to service if any money comes through to collect.

    The FDIC gave this to Onewest Bank, they (onewest bank) muddle the waters when they say they purchased all of Indymac FSB Banks assets. In truth they only purchased Indymac Federal assets which was just the right to service.

    Indymac FSB and Indymac Federal are 2 DIFFERENT BANKS AND ARE NOT THE SAME IN ANY WAY. Please remember this!!!

    The FDIC share loss agreement was to hold the liabilities which was the connection between any trusties in any securitization, while passing the assets to Indymac Ventures LLC, IMB Holdco. If you read further in the agreement it says that if they try to join up again (onewest and any trusties in a trust) that it will be void.

    There is much more, and I will draw it out in a later post when I have more time.

  19. lies is all they tell,

    I did not say WHAT happened. WHY this happened?

  20. Makes perfect sense why the NPV “Net Present Value” formula works against the bank offering ANY loan modifications.
    If the government got out of the way (giving away our tax dollars to the Banksters) things would be a lot different and the housing market might start to recover.

  21. CHECK IT OUT—DOESN’T THIS PROVE THAT MY PAYMENTS HAVE BEEN GOING TO AN UNSECURED DEBT COLLECTOR AND NO WHERE ELSE:

    http://www.fdic.gov/buying/historical/structured/INDYMAC_servicing_agreement.pdf

    from servicing agreement in link:

    “the Company” is Indymac Ventures LLC…a “collections account”…

    “Section 2.06 Collection Account.
    (a) Except as otherwise directed by the Company, the Servicer shall establish
    and maintain one or more Eligible Accounts, which shall be held in trust for the benefit of the
    Company and the Participant and shall be for the sole purpose of holding and distributing the
    Loan Proceeds (each, a “Collection Account”). The Servicer shall deposit into the Collection
    Account all Loan Proceeds on a daily basis (without deduction or setoff as provided in Section
    11.13 hereof). No funds from any other source (other than interest or earnings on the Loan
    Proceeds) shall be commingled in the Collection Account.
    (b) Except as otherwise directed by the Company, on each Servicer
    Remittance Date, the Servicer shall remit all amounts then on deposit in the Collection Account
    to the Company.”

    Comments, anybody???

  22. @lies,

    That is exactly why we must fight and insist on jury trials: to educate judges and juries in a language they can grasp. It’s not even legaleze. My attorney was reading something a few days ago the bank’s attorney sent him and he went: “What? Let me read that again! What? Makes no sense!”

  23. We can’t accuse the repugnicans to be lax in their frantic pursuit of all-across the board privatization… Are all those guys extremely rich, extremely stupid or… both? They haven’t even figured out yet that they are one election away from being sacked! And if they think that banksters will give them a second look once they’re out of office, they are sticking their finger into their eye… all the way down to their A*#!

    http://www.huffingtonpost.com/2011/12/01/public-funding-presidential-campaigns_n_1124436.html

  24. @lies is all they tell

    I agree with you about the language barrier. I figured out from the very beginning when Fidelity hid four of my checks and I couldn’t afford an attorneys to fight them I was going to write in the simplist of plain english terms so that any Judge would understand the facts and my defense.

    Lets me tell you my simple english motions and reply really got the Judges and opposing attorneys angry.

    But there was no mistake what I was fighting for.

    Even though Astoria Federal S & L admitted they auctioned off my two condos without ever owning them. Judge Alice Schlesinger uses double talk so that she could take a bribe and perpertrate title fraud.

    The Appellate Court opinion reads like an LPS Docx Document
    changing all the facts and lying about the dates.

  25. the reason this is happening because………………..drum
    roll please…………….beacuse it can!!! the post above http://law.justia.com/cases/arizona/supreme-court/2011/cv-11-0091-cq.html

    although it sounds like its it is in english it realy is not. unless you have a law degree there is no way in 97% of the folks in the us can understand this giberish. so why is this crisis happening not because people are stupid its because we are as peopel of the united states ignorant (different then stupid ignorant means we do not have the knowledge in our brains) we do not have law degrees to beable to understand this info. this is why the banks are able to steal our homes even though they do not own them. they spew in some legal jargon and forget it we are evicted out of a home they dont own.

    what we need to do is demand they speak english to us. they caused this mess and now want our houses well judges should demand they speak english to us we understand what is going on.

    so again i will repeat why are we losing our homes and gwtting evicted we do not speak legaleze we speak english. sorry folks i went to school in miami i took a spanish class for 3 years but leagaleze was not part of the high school curiculum

  26. Unlike what most people think, Foreclosures are very profitable for the Banks.

    Remember that at the origination the Banks lent you nothing but their credit (make believe money) and when they foreclose they demand lawful money for their credit.

  27. I just would like to know why this happened? Thanks.

    Vasquez v. Saxon Mortgage, Inc.

    http://law.justia.com/cases/arizona/supreme-court/2011/cv-11-0091-cq.html

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