this is really quite sick. IndyMac goes under, and is taken over by FDIC.. who sells to OneWest which renames their Mortgage division IndyMac.. then start treating those foreclosed on like dirt.
Where are our politicans? They should shut this bank down.
http://iamfacingforeclosure.com/blog/2009/12/01/anatomy-of-a-government-abetteded-fraud-why-indymaconewest-always-forecloses/Anatomy of a Government-Abetted Fraud: Why Indymac/OneWest Always Forecloses
By Patrick Pulatie
Dec 1, 2009
Several times per week, I get phone calls from attorneys. These calls all start out the same. “I am unable to get loan modifications done through a lender. What can I do?” The first question I ask is if the lender is Indymac/One West. Invariably, it is.
I also field the same type of calls from homeowners and from loan modification companies. Everyone is having the problem of Indymac not cooperating with regard to doing loan modifications. Furthermore, if I google the issue or check out loan modification forums, the same is true on the internet.
What is going on with Indymac/One West? Why aren’t they doing loan modifications? This article will try and bring together the known facts for a better understanding of the situation, and discuss what the Indymac situation means for foreclosures in general — and the government’s response to the crisis. First, to understand the situation today, one must have an understanding of the recent history of Indymac.
History
Indymac was a national bank in the U.S. It was insured by the FDIC. On July 11, 2008, Indymac failed and was taken over by the FDIC.
Indymac offered mortgage loans to homeowners. A large number of these loans were Option ARM mortgages using stated income programs. The loans were offered by Indymac retail, and also through Mortgage Bankers would fund the loans and then Indymac would buy them and reimburse the Mortgage Banker. Mortgage Brokers were also invited to the party to sell these loans.
During the height of the Housing Boom, Indymac gave these loans out like a homeowner gives out candy at Halloween. The loans were sold to homeowners by brokers who desired the large rebates that Indymac offered for the loans. The rebates were usually about three points. What is not commonly known is that when the Option ARM was sold to Wall Street, the lender would realize from four to six points, and the three point rebate to the broker was paid from these proceeds. So the lender “pocketed” three points themselves for each loan.
When the loans were sold to Wall Street, they were securitized through a Pooling and Servicing Agreement. This Agreement covered what could happen with the loans, and detailed how all parts of the loan process occurred.
Even though Indymac sold off most loans, they still held a large number of Option ARMs and other loans in their portfolio. As the Housing Crisis developed and deepened, the number of these loans going into default or being foreclosed upon increased dramatically. This reduced cash and reserves available to Indymac for operations.
In July, 2008, the FDIC came in and took over Indymac. The FDIC looked for someone to buy Indymac and after negotiations, sold Indymac to One West Bank.
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.
Note: It is not readily apparent as to whether this agreement applies to loans that IndyMac made and Securitized but still Services today. However, I believe that the Agreement does apply to Securitized loans. In that event, OneWest would make even more money through foreclosure because OneWest would keep the “excess” and not pay it to the investor!
Pooling And Servicing Agreement
When OneWest has been asked about why loan modifications are not being done, they are responding that their Pooling and Servicing Agreements do not allow for loan modifications. Sheila Bair, head of the FDIC has also stated the same. This sounds like a plausible explanation, since few people understand the Pooling and Servicing Agreement. But…
Parties Involved
Here is the”dirty little secret” regarding Indymac and the Pooling and Servicing Agreement. The parties involved in the Agreement are:
* The Sponsor for the Trust was…………Indymac
* The Seller for the Trust was……………Indymac
* The Depositor for the Trust was………..you guessed it………….Indymac
* The Issuing Entity for the Trust was……………….(drumroll)……………….Indymac
* The Master Servicer for the Trust was……..once again………Indymac
In other words, Indymac was the only party involved in the Pooling and Servicing Agreement other than the Ratings Agency who rated these loans as `AAA’ products.
To make matters worse, Indymac wrote the Agreement in order to protect itself from liability for these garbage loans. By creating separate Indymac Corporations — which the Depositor, Sponsor, and other entities were — Indymac created a bankruptcy-remote vehicle that could not come back to them in terms of liability. However, they did not count on certain MBS securities and portfolio loans coming back to bite them and force them under.
Now, the questions become:
* If Indymac was responsible for Securitization at every step in the Process, and was responsible for writing the Pooling and Servicing Agreement, can they be held accountable for the loans that they are foreclosing on?
* Since Indymac was the Issuing Entity, can they actually modify loans, but refuse to do so because they can make money for OneWest Bank by refusing to do so?
* Does Indymac have to “buy back” the loan from the Indymac Trust in order to do a loan modification?
These are questions that I have no answer for. All I know is that at every step of the way, Indymac was involved in the process, and have taken steps to protect themselves from liability for loans that should never have been made.
..... (the article goes on. )
HAMP
At this point, it becomes important to note that Indymac/OneWest signed aboard with the HAMP program in August 2009. Even though they became a part of the program, they are still refusing to do most loan modifications. Instead, they persist in foreclosing on almost all properties. And even when they say that they are attempting to do loan modifications, they are fulfilling all necessary requirements so that they can foreclose the second that they “decide” the homeowner does not meet HAMP requirements, — which, since they can make more money by foreclosing on the property, meets the HAMP requirements for doing what is in the best interests of the “investor”.
Why did Indymac even sign up for HAMP, if they have no intention of executing loan modifications? Clearly, just for appearances.
.... (stil goes on)
Conclusion
I have presented the story of Indymac/OneWest and what is happening today. But the story does not end with OneWest. There are over 50 different lenders and servicers who have Shared-Loss Agreements executed with the FDIC. Each Agreement offers essentially the same terms. Though other Lenders do not appear to be acting as flagrantly as OneWest, they are all still engaging in the same actions.
What is the solution for this problem?
* For homeowners individually, the most successes are being achieved by borrowers who are getting knowledgeable attorneys who will not just threaten litigation, but are also willing to act and file the necessary lawsuits. That tends to bring OneWest Bank to the table.
* For the country as a whole, and homeowners in mass, the problem must be brought to the attention of your local Congress Critters. You must hold their feet to the fire. They must know that if they do not respond to what OneWest and other lenders are doing, then they are subject to being voted out of their nice and cushy Congressional Offices.
Will this be easy? No way. After all, the lenders have the money and the ears of Congress. But if we do not draw the line here, then in 10-15 years, the Banks will devise another plan to “loot” the economy, as they do every 10-15 years.
*** (end of article).
I for one will send this article to my Representative and ask Why isn't there a Moratorium on Foreclosures?
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