Here is an example. It is so unbelievable that you may need to read through more than once.
IndyMac was seized by FDIC June 2008.
FDIC sold IndyMac’s assets to OneWest Bank March 2009.
Guess who owns OneWest? 3 guys: GoldmanSachs vice president Steven Munchin, and big time GoldmanSachs billionaire investors Geoge Soros and John Paulson.
OneWest purchased these assets from FDIC at 70% of first mortgage values and HELOCS at 58% of value.
As an "inducement," FDIC promised to cover 80-95% of any losses OneWest may incur from homeowners not making their payments.
In the event of a short sale or foreclosure, the loss is calculated from the original amount purchased, not what is currently owed, or what the house is worth. Huh? Pretty good deal, as you will see.
Here is an actual example of the numbers on a real case:
A new home owner took out a mortgage of $478,000.
Some time later, after he could not make his payments for six months, the bank adds $7,200 for missed payments (so-called "junk fees").
$478,000 + $7,200 = $485,200
OneWest bought this loan for 70% of $478,000 = $334,600
Now, there is a short sale cash offer of $241,000. Take the $485,200 ‘owed’ and reduce it by the cash received from the short sale and you get $244,200.
According to OneWest, they are losing $244,200.
Now, the FDIC is covering 80% of the losses OneWest incurs. So, if you take the $244,200 OneWest says it is "losing," and multiply it times 80%, you get $195,360.
The FDIC pays this $195,360 to One West.
The short sale Buyer pays $241,000.
OneWest gets $436,360!!!
Remember, OneWest paid $334,600 for this loan!
Profit $101,760 thanks to this insane arrangement.
But wait, it gets better.
Still, the house was sold for less than the full loan amount.
OneWest forced the borrower to sign a promissory note for $75,000 for the "deficiency."
OneWest profits $176,760