The Indymac Slap in our Face

[davelj]

[quote=jpinpb]Thanks for the link SD Transplant. Very frustrating and upsetting. I wonder how all those in favor of the bank bailout feel now.

CR says it’s not true.[/quote]

CR is on the right track. Zero Hedge – nor the folks in the video – apparently understand the mechanics of the loss-share arrangements. Which is typical. Ready, fire, aim.

A couple of things to keep in mind:

(1) This was a competitive bidding process. Several parties were involved and came up with various bid structures, of which the FDIC chose the OneWest group as the “least cost” resolution to the FDIC. Having looked at many different bids for failed banks over the last year – although, admittedly, none nearly as large as IndyMac – the FDIC doesn’t play favorites in this process. It’s a pretty simple calculus: (1) What will cost the insurance fund the least amount of money, and (2) Are we sure that the acquiring institution has the both the capital and expertise to integrate the acquisition.
(2) The loss-share arrangements have a ten year tail on the residential RE portion (five years on CRE) during which losses are offset against gains on a portfolio basis. That is, any gains that OneWest realizes in the fashion outlined in the video (for argument’s sake, let’s just assume the math is right on the individual transaction – which doesn’t appear to be the case) are going to be offset by losses. Trust me – the losses are going to far outweigh the gains – which is why virtually every bidder is demanding a loss-share arrangement. (Some bidders don’t want the loss-share arrangement because they don’t want to deal with the tracking and accounting related to distributions and receipts under the arrangements. These bidders just make a straight deep discount bid for the assets, and they aren’t winning many bids.)
(3) This has almost nothing to do with taxpayers. This is about the FDIC insurance fund. Consequently it’s the banks themselves that will be subsidizing the losses taken on in these transactions. (Although I presume that eventually most of these costs will be passed on to consumers in one way, shape or form. That’s how the world works.)

Did OneWest get a good deal in aggregate? Perhaps. Frankly, we’ll know in 3-4 years. It’s too early to tell. (Recall that David Bonderman at TPG thought he was getting a good deal when he re-capped WAMU and look how that turned out. A big fat zero.) If all they did was buy the assets at fair value (in hindsight, of course, and adjusted for the loss-share) then it was a good deal because they got the deposits for zero premium, so things should work out. But, again, we won’t know for a while. The loss-share arrangements tend to be pretty favorable for the acquirer, but do not guarantee bullet proof gains. Also, again, there are multiple bidders on most of these transactions and no one wants to leave “easy” money on the table.

Full disclosure: I don’t give a rat’s ass about the OneWest group – they are WAY above my station in life professionally. But the folks in the video clearly don’t have a good understanding of the complexities surrounding these transactions. By the very nature of the loss-share arrangements, there’s a lot of downside protection for the bidders – but it’s not a total giveaway. I’ve seen plenty of bids recently where losers scratched their heads and said, “I don’t think the winning bank is going to do very well on this one [given their bid].”

A quick example of how you can lose money. $1 billion asset bank – let’s assume all assets are loans just to make things simple. 80/20 threshold is set at $500 million; 95/5 threshold is below $500 million. Let’s assume $400 million in total losses (40%) in the portfolio. The FDIC’s share is $320 million. Despite having the loss-share arrangement, if the winning bidder only assumed 35% aggregate losses in the portfolio, they will lose $30 million net. My point is, you can still very easily lose on these transactions even with the FDIC loss-share arrangement. It’s entirely dependent on how aggressive your bid is.

Anyhow, despite its flaws, this process is certainly more efficient than the RTC was.

[Arraya]

Here’s the money shot:

Such agreements are usually considered to be interpreted to the benefit of the homeowner, as with HAMP and other programs. In legalese, it is called “Intent”.

What was the “Intent” of the Shared-Loss Agreement? Was the intent to provide OneWest Bank solely with a profitable incentive to take over Indymac Bank? If so, then OneWest has been truly successful in every manner.

Or was the intent to offer to OneWest Bank a way to be compensated for losses for foreclosures, but with the primary goal to assist homeowners in trouble? If this was the intent, then OneWest has failed miserably in its actions. And if so, could OneWest be actionable by the Federal Government for fraud?

In fact the true “Intent” was to limit losses to the Treasury Department. Each and every loan modification done would save the Treasury, and the tax payer, from 80-95 cents on every dollar.

Since, technically, One West would get 5-20 cents of any savings, it should have been an incentive to use foreclosure alternatives. But the reality is that the quick turnaround on foreclosure seems to give OneWest a better return. As a result, OneWest appears to simply ignore the intent and just foreclose (as far as I can tell).

So, OneWest’s failure to modify loans may actually amount to fraud on the Treasury and US taxpayers.

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.

[Arraya]

Here’s the money shot:

Such agreements are usually considered to be interpreted to the benefit of the homeowner, as with HAMP and other programs. In legalese, it is called “Intent”.

What was the “Intent” of the Shared-Loss Agreement? Was the intent to provide OneWest Bank solely with a profitable incentive to take over Indymac Bank? If so, then OneWest has been truly successful in every manner.

Or was the intent to offer to OneWest Bank a way to be compensated for losses for foreclosures, but with the primary goal to assist homeowners in trouble? If this was the intent, then OneWest has failed miserably in its actions. And if so, could OneWest be actionable by the Federal Government for fraud?

In fact the true “Intent” was to limit losses to the Treasury Department. Each and every loan modification done would save the Treasury, and the tax payer, from 80-95 cents on every dollar.

Since, technically, One West would get 5-20 cents of any savings, it should have been an incentive to use foreclosure alternatives. But the reality is that the quick turnaround on foreclosure seems to give OneWest a better return. As a result, OneWest appears to simply ignore the intent and just foreclose (as far as I can tell).

So, OneWest’s failure to modify loans may actually amount to fraud on the Treasury and US taxpayers.

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.

[Arraya]

Here’s the money shot:

Such agreements are usually considered to be interpreted to the benefit of the homeowner, as with HAMP and other programs. In legalese, it is called “Intent”.

What was the “Intent” of the Shared-Loss Agreement? Was the intent to provide OneWest Bank solely with a profitable incentive to take over Indymac Bank? If so, then OneWest has been truly successful in every manner.

Or was the intent to offer to OneWest Bank a way to be compensated for losses for foreclosures, but with the primary goal to assist homeowners in trouble? If this was the intent, then OneWest has failed miserably in its actions. And if so, could OneWest be actionable by the Federal Government for fraud?

In fact the true “Intent” was to limit losses to the Treasury Department. Each and every loan modification done would save the Treasury, and the tax payer, from 80-95 cents on every dollar.

Since, technically, One West would get 5-20 cents of any savings, it should have been an incentive to use foreclosure alternatives. But the reality is that the quick turnaround on foreclosure seems to give OneWest a better return. As a result, OneWest appears to simply ignore the intent and just foreclose (as far as I can tell).

So, OneWest’s failure to modify loans may actually amount to fraud on the Treasury and US taxpayers.

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.

[Arraya]

Here’s the money shot:

Such agreements are usually considered to be interpreted to the benefit of the homeowner, as with HAMP and other programs. In legalese, it is called “Intent”.

What was the “Intent” of the Shared-Loss Agreement? Was the intent to provide OneWest Bank solely with a profitable incentive to take over Indymac Bank? If so, then OneWest has been truly successful in every manner.

Or was the intent to offer to OneWest Bank a way to be compensated for losses for foreclosures, but with the primary goal to assist homeowners in trouble? If this was the intent, then OneWest has failed miserably in its actions. And if so, could OneWest be actionable by the Federal Government for fraud?

In fact the true “Intent” was to limit losses to the Treasury Department. Each and every loan modification done would save the Treasury, and the tax payer, from 80-95 cents on every dollar.

Since, technically, One West would get 5-20 cents of any savings, it should have been an incentive to use foreclosure alternatives. But the reality is that the quick turnaround on foreclosure seems to give OneWest a better return. As a result, OneWest appears to simply ignore the intent and just foreclose (as far as I can tell).

So, OneWest’s failure to modify loans may actually amount to fraud on the Treasury and US taxpayers.

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.

[Arraya]

Here’s the money shot:

Such agreements are usually considered to be interpreted to the benefit of the homeowner, as with HAMP and other programs. In legalese, it is called “Intent”.

What was the “Intent” of the Shared-Loss Agreement? Was the intent to provide OneWest Bank solely with a profitable incentive to take over Indymac Bank? If so, then OneWest has been truly successful in every manner.

Or was the intent to offer to OneWest Bank a way to be compensated for losses for foreclosures, but with the primary goal to assist homeowners in trouble? If this was the intent, then OneWest has failed miserably in its actions. And if so, could OneWest be actionable by the Federal Government for fraud?

In fact the true “Intent” was to limit losses to the Treasury Department. Each and every loan modification done would save the Treasury, and the tax payer, from 80-95 cents on every dollar.

Since, technically, One West would get 5-20 cents of any savings, it should have been an incentive to use foreclosure alternatives. But the reality is that the quick turnaround on foreclosure seems to give OneWest a better return. As a result, OneWest appears to simply ignore the intent and just foreclose (as far as I can tell).

So, OneWest’s failure to modify loans may actually amount to fraud on the Treasury and US taxpayers.

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.

[jpinpb]

[quote=Arraya]It wont let me link for some reason. Go look at that article.[/quote]

I am facing foreclosure

[jpinpb]

[quote=Arraya]It wont let me link for some reason. Go look at that article.[/quote]

I am facing foreclosure

[jpinpb]

[quote=Arraya]It wont let me link for some reason. Go look at that article.[/quote]

I am facing foreclosure

[jpinpb]

[quote=Arraya]It wont let me link for some reason. Go look at that article.[/quote]

I am facing foreclosure

[jpinpb]

[quote=Arraya]It wont let me link for some reason. Go look at that article.[/quote]

I am facing foreclosure

[Arraya]

The way the video was framed was inaccurate however it was correct. Just as CR was accurate in sense but also wrong. Life is full of paradoxes. It boils down to how One West interprets Shared-Loss agreement which appears to be differently than all other banks.

No conspiracy, just a bank interpreting the rules differently and probably has some good lawyers to back them up. Whether what they are doing is “wrong” is up to a judge to decide. Which boils down to their aversion to modifications which apparently could amount to fraud. Again, that is a legal interpretation on the word intent.

It’s the conspiracy of self interest backed up with lawyers. Pretty common in the business world.

[Arraya]

The way the video was framed was inaccurate however it was correct. Just as CR was accurate in sense but also wrong. Life is full of paradoxes. It boils down to how One West interprets Shared-Loss agreement which appears to be differently than all other banks.

No conspiracy, just a bank interpreting the rules differently and probably has some good lawyers to back them up. Whether what they are doing is “wrong” is up to a judge to decide. Which boils down to their aversion to modifications which apparently could amount to fraud. Again, that is a legal interpretation on the word intent.

It’s the conspiracy of self interest backed up with lawyers. Pretty common in the business world.

[Arraya]

The way the video was framed was inaccurate however it was correct. Just as CR was accurate in sense but also wrong. Life is full of paradoxes. It boils down to how One West interprets Shared-Loss agreement which appears to be differently than all other banks.

No conspiracy, just a bank interpreting the rules differently and probably has some good lawyers to back them up. Whether what they are doing is “wrong” is up to a judge to decide. Which boils down to their aversion to modifications which apparently could amount to fraud. Again, that is a legal interpretation on the word intent.

It’s the conspiracy of self interest backed up with lawyers. Pretty common in the business world.

[Arraya]

The way the video was framed was inaccurate however it was correct. Just as CR was accurate in sense but also wrong. Life is full of paradoxes. It boils down to how One West interprets Shared-Loss agreement which appears to be differently than all other banks.

No conspiracy, just a bank interpreting the rules differently and probably has some good lawyers to back them up. Whether what they are doing is “wrong” is up to a judge to decide. Which boils down to their aversion to modifications which apparently could amount to fraud. Again, that is a legal interpretation on the word intent.

It’s the conspiracy of self interest backed up with lawyers. Pretty common in the business world.

[Author]

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