Wednesday, February 10, 2010

One West Bank And The Dirty Word

Hello People.
This is how it went down and is going downer.....

Indymac was seized by the FDIC in July of 08 because it had a ton of bad loans out and there was a semi run on the bank. Anyway, the FDIC turned around and sold Indymac and all of it's bad loans to newly formed One West Bank. In order to get the sale done the FDIC had to sell it at 70 cents on the dollar amount of the loans. Doesn't sound too evil yet. Just hold on brother.

The side deal was that on any foreclosure or short sale loss taken by One West Bank the FDIC would reimburse One West Bank 80%. Not 80% of what One West bought it for (remember the 70 cents on the dollar?) but of the original loan amount. Did you hear me? I can't hear you screaming?

Some real disturbing #s, are you ready? It gets pretty ugly. You've been warned.
A short sale on a house is completed at a purchase price of $250,000. With fees and all of that junk, lets say that One West Bank nets $200,000. The original loan was $400,000. Leaves OWB with $200,000 and a loss of $200,000. The FDIC gives them (very nice people at FDIC) 80% of the loss, or $160,000. OWB has $360,000 in their pocket, net. Wait! They only paid $280,000 for the loan. Nice net of $80K without doing to much, eh?

Is it any wonder why loan modifications are as mythical as a unicorn or celibate NBA star?
Check out a video (click on the title) describing this and let me know if you're pissed off.
God Bless.