Exclusive: Sweetheart Mortgage Deals for Billionaires that will Make Your Blood Boil
by BOB HERTZOG
February 15, 2010
The American people are being defrauded again. And by the very same people who screwed us the first time.
I know. I've seen how it's happening first hand. I've seen how billionaires have made their billions off of bankrupt American families -- in a scheme that would make George Ponzi blush. These countrymen of ours are picking at the carcass of the American taxpayer, and they're doing it with the help of the federal regulators in Washington.
Here's how it works: it all started with a phone call I received in early May/2009. The caller sounded troubled, as so many are these days. He told me he had spent several days researching his options.
He owed $478,000 on his first mortgage with OneWest Bank, and $30,000 on his second mortgage with Bank of America. He and his wife were separating, and headed for divorce. He had not been able to find employment for over a year, and he had depleted all of his savings and retirement funds in order to continue making the mortgage payment over the past year. His soon-to-be ex-wife had recently had her hours cut by 50 percent, and they were having a hard time putting food on the table, much less making a $2,600 per month mortgage payment. For all intents and purposes, he was at the end of his rope.
He stumbled across our website where we specialize in distressed properties – www.foreclosureuturn.com – learned what his options were and decided to proceed with a short sale. The reasons for his decision were twofold. He wanted to salvage his credit as best he could, and he didn’t just want to “walk away” from his mortgage without at least trying to sell his home for market value. He, like so many other Americans, wanted to do “the right thing.”
Fast forward two months. We received an all-cash, no contingencies offer that would net thefirst mortgagor (OneWest Bank) $241,000. OneWest conducted a Broker’s Price Opinion (similar to an appraisal), and it came back at $275,000 (same as the price on the contract). Life was good, we thought. Then the fun began.
OneWest sent us a letter, approving the short sale, but under one condition: The Seller had to commit to a $75,000 promissory note, or they would proceed to foreclosure. For the life of me, I couldn’t figure out why they were doing this. Arizona has an anti-deficiency statute in place, which protected my client from ever having a judgment filed against him for the loss OneWest would incur. They had my client’s last two years’ tax returns, his last two months’ bank statements, etc. At the time, he had less than $2,000 to his name. Why are they doing this? I was so infuriated by their response that I decided to send the story to all of the news outlets in the Phoenix market. The next day, the local NBC affiliate interviewed us on the case. During a break between interviews, the reporter told me, “Bob, there is more to this story. There must be a reason they are doing this.” Boy was he right!
I spent the next two to three days poring over articles and blogs on the Internet regarding OneWest Bank. Finally, I stumbled across a Wall Street Journal article that described a new program that the FDIC had put in place in order to “sweeten the pot” for the investors that were purchasing the banks they had shuttered. This new phenomenon, called a “shared-loss agreement,” literally made my jaw drop.
You see, Indymac Bank was taken over by the FDIC and sold to OneWest Bank in March/2009. OneWest was funded by none other than George Soros (billionaire), Michael Dell (billionaire), Steve Mnuchin (former Goldman Sachs Executive), and John Paulson (hedge-fund billionaire). Now, listen to the deal they won from the FDIC:
Basically, they purchased all current residential mortgages at 70 percent of par value (70 percent of the outstanding loan amounts). They purchased all Home Equity Lines of Credit (HELOC’s) at 58 percent 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 percent 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 client’s actual situation as an example:
Loan amount is $478,000, plus 5 months of missed payments, for a grand total of $485,200.
OneWest paid $334,600 for the loan when they purchased IndyMac from the FDIC.
We have an all-cash, no contingencies offer to OneWest, with a Net of $241,000 (after closing costs, commissions, etc.)
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 shared-loss agreement, writes a check to OneWest for 80 percent of the so-called “net loss.” So, in this case, OneWest gets a check from the FDIC for $195,360 (.80 x $244,200).
Add the $195,360 (via the FDIC) to the net 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 $100,000 of our hard-earned tax dollars for only one transaction! Now, the FDIC will tell you that they are not funded by taxpayer dollars but by charging premiums to the lenders. My response to their argument is this: When the banks pay higher premiums to the FDIC to cover these “sweetheart deals,” they simply increase the fees that we all pay everyday to the banks. Also, as most of you know, the FDIC has been considering tapping into their $500 billion “credit card” that they have in place with the U.S. Treasury. Folks, the taxpayers ARE paying for these deals, just like we have all paid for the bailouts.
So, you ask, “How does this program hurt loan modifications and short sales?” Because, our brilliant government offers this SAME PROGRAM FOR FORECLOSURES! The only difference is that the FDIC picks up 80 percent of the tab on all of the extra costs associated with a foreclosure (BPOs, 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? And we wonder why nobody can get a Loan Modification? Why would OneWest approve a loan modification for this guy, when they can foreclose and make over $100k? And, to add insult to injury, they have held this loan for six months! Not a bad ROI (return on investment), 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 $75,000 promissory note, after they are already making more than $100,000 for the sale! Can you say “GREED?”
Now, here is the best part of the story. Upon learning about the OneWest shared-loss agreement with the FDIC, I sent letters to Sens. John McCain and Jon Kyl, CCing the CEO of OneWest, explaining the shared-loss agreement, as well as including the FDIC worksheets, with the actual numbers in this case, showing them that OneWest was making over $100,000 on this deal, thanks to the FDIC. Within 24 hours, I received a response from the PR firm representing OneWest, telling me that OneWest would dismiss the promissory note requirement, and the short sale was approved. We closed escrow three weeks later. My client not only avoided a $75,000 commitment, but also salvaged his credit by short-selling his home, versus handing it back to OneWest via foreclosure.
The scary thing is that over 50 banks have shared-loss agreements in place with the FDIC. Who knows how much the FDIC has spent on this program since its inception?
The entire agreement between the FDIC and OneWest can be found here.
It’s all there, for the world to see. They have all of the formulas, worksheets, etc., all laid out.
Now, fast forward to Monday, February 8th. I received several e-mails from friends and acquaintances, asking me if I had seen a video that had been posted that sounded eerily familiar to my case.
The gentlemen from “Think Big Work Small Daily Show” found my blog and decided to put together a video, describing the shared-loss agreement that OneWest has in place. They used the actual numbers from my case. To make a long story short, the video went “viral” and by Thursday, February 11th, the video had over 500,000 views, according to the owners of the site.
On Friday, February 12th, the FDIC struck back, coming out with an official press release, regarding the video, which denied any wrongdoing.
As you could imagine, many in the blogosphere used the press release to discredit the video. There were lots of “I told you so’s.” Heck, we all know that when the FDIC says something, it must be true. Right? Ummm, I don’t think so.
Sorry FDIC, but not only did your press release not refute the video's claims in the least, but you just dug yourself an even deeper grave as every aspiring blogger and investigative reporter will now do everything in their power to find comparable examples of blatant "slap in the face" fraud expecting you to retort to any and all allegations, ensuring 15 minutes of fame for all implicated.
Regardless of whether the video (or my blog for that matter) may have left out some of the details, as the FDIC claims, there is one thing that I still cannot seem to understand:
Since writing my blog in September/2009 on my case with OneWest, I have received numerous calls from Realtors, lawyers, bankers, and homeowners throughout the country. In at least three cases right here in Arizona, I have had three separate Realtors call me, asking for advice on how to handle their similar predicaments. In all three cases, I suggested they do what I did. Write to McCain and Kyl, and copy the CEO of OneWest, Terry Laughlin. In all three cases, OneWest capitulated, dismissing their promissory note requirement and approving the short sale, no questions asked. In all three cases, the Realtors were able to help salvage their client’s credit by avoiding foreclosure.
So, my question to the FDIC and OneWest is, if this story is so “blatantly false” as you claim it to be, why does OneWest change its tune when they are reminded of their greed?
If you or someone you know is facing a difficult loan modification or short sale situation, please refer them to this story. Or, feel free to have them visit my website at www.foreclosureuturn.com. The site does a great job of explaining all of the available alternatives to foreclosure.
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