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Tuesday, February 23, 2010

OneWest bank makes money from home shortsales

OneWest purchased assets FDIC seized from IndyMac. They purchased mortgages at 70% of face value, and Helocs at 58%. The FDIC threw in that they would cover 80 to 95% of losses from short sales from the face price, not the paid price (70% of original value). This of course instantly builds in a nice bonus for OneWest to sell houses at a loss, since the difference is paid by the US Taxpayer from the higher price.

The complete video showing how this works is listed here (click). The real life example they give is summarized here:
Home total loan amount is $485,200, including missed payments.
Face value of loan is 478,000, OneWest paid * 70% = $334.600.
Underwater homeowner offers 241,000 for the house.
FDIC agreement takes 485,200 - 241,000 = $244,200 "loss" * FDIC refund of 80% = 195,360

So OneWest takes in 241,00 + 195,360 = 436,360, on a house they paid for 3/20/09 334,600, for profit of 101,760.

As the video asks why should banks modify loans? The answer they shouldn't. Wait for the government to intervene and the banks will get a bonus from the government.

OneWest can sell houses at any price, and they will make money.
And you know what? They should should take every nickel they can from the taxpayer. If the taxpayer didn't want to give away money like this, pressure would be put on Washington to stop looting the future of this country.

UPDATE: 2/22/10, This video apparently got notice, allegations filed in the Eastern District of U.S. Bankruptcy Court claim that OneWest can make more money by foreclosing than by keeping borrowers in their homes.

Thanks to my father for the link.

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