FDIC Loan Loss Agreements Drive Lenders Away From Good Faith Loan Modification


A video appeared February 8, 2010 by a group called "Think Big, Work Small". This is a group of real estate professionals and mortgage industry entrepreneurs whose purpose is to perfect and refine business tools that minimize effort and training but lead to significant results.

The subject matter of the video is a case history of borrowers who were represented by real estate consultant Bob Hertzog who does business with his brother-in-law Ed Cheney in the Scotsdale, AZ area as Summit Home Consultants. By virtue of a series of agreements between One West Bank and the FDIC that were entered into when the failed IndyMac Bank was taken over by OWB last year, the FDIC agreed with OWB to bear 80% of total losses ("Cumulative Shared Loss Amount") after the purchasing bank (OWB) realizes 20% of losses on the unpaid principal balance ("First Loss Amount") of the failed bank's loans. In the case example, this yielded an estimated profit of over 30% on a short sale that took place within six months of the takeover.

This article excerpts and paraphrases the definitions and applicable provisions of the Loan Purchase Agreement and Shared Loss Agreement between the Receiver ("FDIC")and Purchaser ("OWB"). There is some background information about OWB's founders, investors and CEO. There is a significant tie with Goldman Saks via former VP Steven T. Mnuchin who is now the OWB CEO. It is also true that OWB is a billionaire funded organization (George Soros, Michael Dell and John Pauson are involved). They are ready to capitalize on evolving business trends.

A select few of the thousands of comments on the video blog are set forth in this Article and analyzed. From a legal standpoint, borrowers are urged to consider whether court proceedings, civil or bankruptcy, are indicated. There have been successes, most notably the New York case in November, 2009 where an IndyMac loan was cancelled for lender misconduct.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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