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February 15, 2010

Bob Hertzog

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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.

Soon after the release, zerohedge.com released a response, which in part said this:

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.

FamilySecurityMatters.org Contributing Editor Bob Hertzog is the founder of Summit Land Consultants, and co-founder of Summit Home Consultants in Phoenix, Arizona. His website is www.foreclosureuturn.com.

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Comments (13)

Right on, Bob! The nation should hold the FDIC's feet to the fire on this association with OneWest and ALL the other banks that got the same sweetheart deal. Deny all you want to, FDIC! We are not deceived by your "unusual" response. And I, personally, don't believe one syllable of it.

posted by: Leslie Sease
Monday, February 15, 2010 at 09:51 AM

I am bringing this to your attention to let you know what is happening at Indy Mac/One west Bank. On April 20, 2009 I submit documents for consideration for a loan modification and was advice that the process would take up to 60 days for review.
I started to call to follow up with Indy Mac/One west Bank on June 11, 2009 and spoke Michelle and the phone call drape. I tried again and I got Monica who transfers over to Cindy who advises me that the entire document was received and the file is being reviewed and I should try to make a payment. I call on June 30, 2009 and spoke with Elizabeth 96Q who also advise me that the file is still in review and they will get in touch once a decision has been made. I call back on July 13, 2009 and spoke with Yari CH6 who told that the file is still been reviewed. I call on July 28, 2009 and spoke with Sofia 73T also told me the file is still been reviewed. I call on August 18, 2009 and spoke with Patrice O95 who advise me that a letter was sent out in April asking for the financial which I told her that it was sent with the original documents and I have been following and the file and no one had ever told that document was needed, infect I was told that everything is in the file. She advises me to up date it and send it in again. I did so and call back on August 25, 2009 and spoke with Sara that I refax all the documents included the bank statement of pay check and tax returns, I was also advise that since you donâ€™t have pay stud I should send a profit and loss statement which was done. I call back on the August 27, 2009 and spoke with Keisha 74P who told me that all the documents was received included the profit and loss statement, we went over the financial statement and was advise that because there is a rental income for it to be counted as income they will need to see copy of the lease, I told her I will have it by Monday. I call on August 31 after I fax the rental agreement and spoke with Alicia JI4087 and was told that the file will be reviewed and it would take 24 to 48 hours for the lease to be in their system. I call on September 1, 2009 to follow up if the lease is in the system and I spoke with a Todd 842 who advise me that the investor stop doing modification on these loan, I ask him when did this occur and I was told since April, I ask why didnâ€™t any one told me this when I call on may occasion and he could give me an answer. I ask about what the FDIC stated and I was told it is up to the investor, I ask about the president program and I was told the investors is not doing any modification.
I loss my job on December 22, 2009 and I was bless to find a job in March and exhaust my saving paying property tax and property insurance and was trying to get caught up and was having it hard so I apply for a modification and was lead to believe that everything is fine only to find out it is not.
Please help me, I do not want to lost my home I am doing my best. I was told by Todd 842 at Indy Mac/One west I could to do a short sale that is one of my option. I have also spoke with a Mr. Michael Bekes and he told me because of the investors the loan is pool with the Onewest bank they are not doing any modification and the only thing they can offer is a short sale, which do not make any sense. I do not want to sell my home, please help I donâ€™t know what to do next.

posted by: Carol Russell
Monday, February 15, 2010 at 06:50 PM

Hi Carol, I'm sorry to hear about your situation. Unfortunately, there are thousands of stories just like yours in regards to not only Onewest/IndyMac, but many other lenders as well. I'm not sure what state you are in, but feel free to contact me tomorrow and I would happy to put you in touch with someone in your community that can help you out. Please feel free to email me at bob@summitland.com, and we can get in contact.

posted by: Bob Hertzog
Monday, February 15, 2010 at 07:14 PM

I did the short sale in spring of 2019 and the divorce. I have been advising others since
Once the banks are confronted wwith the truth they back down. But most people do not know about the heist.

posted by: DAVID JOHNS
Monday, February 15, 2010 at 09:39 PM

Bob, if OneWest - or any other purported note holder for that matter - is willing to walk away from a promissory/deficiency note scheme like this so readily when questioned, why not go one step further and ask for production of the original note per Article 3 UCC if for no other reason than to make sure that you are negotiating with an entity that has legal standing to enter into such contractual arrangements?

posted by: Mike Dillon
Monday, February 15, 2010 at 10:10 PM

David: Great point, and it explains exactly why I chose to write this blog. I felt that it was necessary to "get the word out" and let people know that there is a way to beat them at their own game. You said it best... Confront them with the truth, and they back down. Scary thought, isn't it? Actually, I think if you "REMIND them with the truth, they back down". They already know how sweet the deal is. They just need to be reminded of it.

Mike: Great Point! Lately, I've read several cases where the borrower asked for the lender to produce the original note, and they cannot do it. Hopefully, many more will throw this back at them in the future.

Thanks for the insight folks, and spread the word!

posted by: Bob Hertzog
Monday, February 15, 2010 at 10:45 PM

I have some interesting resources for further knowledge:

Greece implements plan to make cash
transactions illegal
Reuters - In a predictable move, Greece plans
to outlaw all cash transactions above 1,500
euros between natural persons and businesses,
or between businesses, will not be considered
legal if it is done in cash. Transactions
will have to be done through debit or credit
cards.

The new law will take effect on January 1 of
next year.

How long before the U.S. proposes the same?

---
The fall of the empire - chilling documentary.
http://www.youtube.com/watch?v=F8LPNRI_6T8&feature=player_embedded

Chilling documentary film about obama, the bankers control and coming dangers to freedom...and on 2nd hour on the climate and carbon tax...
It seems to me like in coming 5-10 or 15 years a world could evolve where the carbon "Environment" police walks into your home, charges you for the pleasure and takes your home away for illegal occupancy, due to your environmental crimes and heavy debt (they can fine people for years back) you won't be able to afford to pay... It all sounds so crazy, like a made up conspiracy, but it looks like it is reality.

posted by: Eileen
Tuesday, February 16, 2010 at 07:36 AM

'Shared loss' is a sharia compliant requirement.

posted by: Mae Eye
Wednesday, February 17, 2010 at 12:15 AM

Do not delay. Go immediately to the reports of the Offices of the Inspectors General of the OTS and FDIC and you will see the zaniest responses ever to the 2nd largest bank failure: the personnel was new, they were untrained, they had large caseloads. What these reports DON'T tell you is WHY, after the FDIC knowingly allowed IndyMac into a death spiral, Congress allowed it to backdate a key deposit and continue collecting $91 million in new funds - which the FDIC knew were "doomed" to only 50% coverage. And where is that $270 million in cash deposits? the FDIC refuses to say. Perhaps it was used to underwrite the expenses of this "under-the -radar" deal. Go READ! www.fdic.gov/reports09/09-006EV.pdf AND Department of the Treasury, OIG-09-032. â€œSafety and Soundness" Material Loss Review of IndyMac Bank, FSB, February 26, 2009, http://www.ustreas.gov/inspector-general/audit-Reports/2009/oig09032.pdf

posted by: fran quittel
Wednesday, February 17, 2010 at 08:48 PM

Bob, I'm a short sale specialist, so your article really piqued my interest. I'd like to send your article in its entirety to my clients as an alert. Do I have permission to do that? (about 500 total). I will include the title, your name and the source information.

posted by: Maurice Sikes
Tuesday, February 23, 2010 at 02:06 PM

Feel free to share it with whomever you like Maurice, and thanks for asking!

posted by: Bob Hertzog
Tuesday, February 23, 2010 at 07:54 PM

Compare Mortgages</a<

posted by: crist
Friday, October 22, 2010 at 03:26 PM

Compare Mortgages

posted by: crist
Friday, October 22, 2010 at 03:28 PM

Eurabia Watch

Exclusive: Sweetheart Mortgage Deals for Billionaires that will Make Your Blood Boil