Spectre writes of the latest grotesque fleecing of the folks by Obama mentor and money man George Soros. It's all so dirty, the stench is overwhelming. And Obama preaches to us so.
One West Bank, the bank formed out of the IndyMac failure, has been getting ripped in the press and by the courts lately. Just last week, a judge in the NY Supreme Court went above and beyond and way out of his way to rip One West several new orafices (link here). In finding for the poor defendant homeowner and wiping out her dedt to OneWest, the Judge opined:“Plaintiff’s conduct is wholly unsupportable at law or in equity, greatly egregious and so completely devoid of good faith that equity cannot be permitted to intervene on its behalf. Indeed, Plaintiff’s actions toward Defendant in this matter have been harsh, repugnant, shocking and repulsive to the extent that it must be appropriately sanctioned so as to deter it from imposing further mortifying abuse against Defendant.”
Yikes! In judicial terms, the judge took a flamethrower to them.
Then today, I find a little article in a relatively obscure blog that hits the nail on the head. It is factually accurate and correctly connects all of the dots.
So who owns OneWest? None other than the Collaborator himself. Yes, O's biggest supporter cuts an unconscionable deal with the FDIC (I have never seen one like it). The deal provides incentive for Soros to toss people out in the street through foreclosure and to ignore the lip service the Obama administration is and has given to protecting people in need. George makes no money if he allows people to midify their loans, but makes a tin of it is he forecloses on them and tosses them out into the street. My, my.
And at this time of year, when we are all watching Jimmy Stewart in It's A Wonderful Life for the umpteenth time, one cannot not help to ingore the similarities between George Soros and Old Man Potter......
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.
HistoryIndymac 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 DealOneWest 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:
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:
- 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.
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.
- 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.
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 AgreementWhen 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 InvolvedHere is the”dirty little secret” regarding Indymac and the Pooling and Servicing Agreement. The parties involved in the Agreement are:
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.
- 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
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:
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.
- 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?
Loan ModificationsAs referred to earlier, the Agreement covers all aspects of the Securitization Process. With respect to Loan Modifications, the Agreement for Indymac INDA Mortgage Loan Trust 2007 – AR5, states on Page S-67:
Certain Modifications and Refinancings
The Servicer may modify any Mortgage Loan at the request of the related mortgagor, provided that the Servicer purchases the Mortgage Loan from the issuing entity immediately preceding the modification.Page S-12 states the same “policy”:
The servicer is permitted to modify any mortgage loan in lieu of refinancing at the request of the related mortgagor, provided that the servicer purchases the mortgage loan from the issuing entity immediately preceding the modification. In addition, under limited circumstances, the servicer will repurchase certain mortgage loans that experience an early payment default (default in the first three months following origination). See “Servicing of the Mortgage Loans—Certain Modifications and Refinancings” and “Risk Factors—Risks Related To Newly Originated Mortgage Loans and Servicer’s Repurchase Obligation Related to Early Payment Default” in this prospectus supplement.These sections would appear to suggest that the only way that OneWest could modify the loan would be as a result of buying the loan back from the Issuing Trust. However, there may be an out. Page S-12 also states:
Required Repurchases, Substitutions or Purchases of Mortgage Loans
The seller will make certain representations and warranties relating to the mortgage loans pursuant to the pooling and servicing agreement. If with respect to any mortgage loan any of the representations and warranties are breached in any material respect as of the date made, or an uncured material document defect exists, the seller will be obligated to repurchase or substitute for the mortgage loan as further described in this prospectus supplement under “Description of the Certificates—Representations and Warranties Relating to Mortgage Loans” and “—Delivery of Mortgage Loan Documents .”The above section may be the key for litigating attorneys to fight Indymac. If fraud or other issues can be raised that will show a violation of the Representations and Warranties, then this could potentially force Indymac to modify the loan.