Here Comes the NH Foreclosures 2010
Here Comes the NH Foreclosures
So after many months of me saying to everyone I know “We are not out of this foreclosure mess yet” It appears I am right. Not that I am tooting my own horn, but how can we be naive to think the big brother is actually going to Help Us. The very people who run companies and who gorge themselves with bonuses, getting rich while there companies lose money are the same one in political power. Not just at seat in Congress or the Senate but Directors of the Treasury, FDIC and other key financial positions. The deal that the FDIC made with One West Bank is so ridiculous and will destroy the housing market and that is 1 deal with 1 company. I agree that companies need some sort of incentive to take on failing assets, but at the price of decimating the economy???
The deal the FDIC made pretty much goes like this; the FDIC took control of Indy Mac Bank in 2008. They sold the assets to One West in 2009. One West paid 70% of the current value of the loan. When the property was sold the FDIC agreed to give One West 80% of the loss. Now the loss is computed from the Original Loan Amount… the math goes something like this
450,000 original loan amount
400,000 current loan amount sold @ 70% = 280,000
Sales price net is 250,000. Then you take the Original Amount
450,000-250,000 = 200,000 x 80% = 160,000 that the FDIC agreed to give to One West. Add that to the sales amount of 250,000 and One West is realizes 410,000 for a 280,000 purchase. That is more then about a 68% Return on Investment.
Now here is the scary part…The FDIC will only give the 80% subsidy to One West if their losses exceed 2.5 Billion Dollars. Now I am not Einstein, but come one. If that is not an incentive to fail, and it is black and white, then I give up. No wonder the loan modifications and the short sales are not being approved. It is in the company’s best interest to loose money because they stand to make over 2 Billion Dollars…What do I need to do to be a VP at that company?
I was reading that Chase had 500,000 loan modifications applications and only and estimated 500 were approved. The other ones that were approved were quasi loan mods to just buy some time but not permanent mods.
My asset managers at Fannie Mae and some of the countries biggest banks have been telling me since October that end of Quarter one and Quarter 2 is going to be more ugly then what we have seen in the past 2-3 years so hold on.. “The unmentioned Gray Market is approaching”