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FDIC Hurting Distressed Homeowners

James McCormack

As set forth in this FDIC publication, IndyMac Shared-Loss Agreement, the FDIC is making so called "Shared-Loss Agreements" (SLAs) with investors who are willing to purchase the assets of insolvent financial institutions. Without going into all the details, these SLAs basically offer these investors guarantees on huge percentages of any net losses that they may suffer as a result of their investment in the failed financial institution. In this particular case, the FDIC is paying for 80%+ of the net losses of the investor (OneWest Bank) who purchased the assets of IndyMac. Basically, the Net Loss is calculated by taking the current outstanding balance of the mortgage note (at the time of the loan purchase) less the net proceeds of the short sale or foreclosure offer price.

The reason this is a problem for financially distressed homeowners is that due to the loss guarantees provided by the FDIC, the investors mentioned above have very little financial risk in the deal. Therefore, they have incentives to take what would normally be a big risk (but isn't due to their sweet loss guarantees courtesy of the FDIC) such as foreclosing on homeowners to try and squeeze out more profit even when there are feasible alternatives to foreclosure such as short sales and loan modifications. As a result, these investors are making it difficult and even impossible to get loan modifications and short sales approved.

In her blog post, Is the FDIC Killing Short Sales, Alexis McGee of states that "IndyMac was taken over by the FDIC and sold to OneWest Bank in March/2009. Guess who the investors are behind OneWest? George Soros, Michael Dell, Steve Mnuchin (former Goldman Sachs executive), and John Paulson (hedge-fund billionaire)." She goes on to describe the terms of the SLA. The highlights are below:

* The investors purchased all current residential mortgages at 70% of par value (70% of the outstanding loan amounts).

* They purchased all current HELOCS at 58% of Par Value.

* The FDIC stepped in and guaranteed that for any residential mortgages where OneWest experiences a loss, the FDIC will step in and cover anywhere from 80%-95% of the loss. The loss is calculated using the current outstanding balance of the mortgage note (at the time of the loan purchase), not the amount that OneWest paid for the loan.

* For foreclosures, the FDIC picks up 80% of the tab on all of the extra costs associated with a foreclosure (BPO's, upkeep, utilities/maintenance, legal fees, etc.)

Here is an example which shows why this creates a problem for financially distressed homeowners who would like to do a short sale, or obtain a loan modification. Let's say one of the loans that OneWest purchases has a Current Loan Amount of $500,000. Based on the 70% purchase deal described above, OneWest would have paid $350,000 for this loan. Also, let's assume that an all cash investor wants to purchase the property via a short sale for net offer price to OneWest of $200,000. Below is the analysis of this situation:

* The Net Loss, according to the FDIC calculations, is $500,000 (i.e. the current outstanding balance of the mortgage note at the time of loan purchase) less $200,000 (i.e. the net proceeds of the short sale offer) = $300,000.

* Based on this $300,000 Net Loss, the FDIC pays OneWest $240,000 (i.e. 80% of the Net Loss).

* One West would then be able to sell the property in question for the short sale Net Offer Price of $200,000 and end up with total revenue of $440,000 ($240,000 + $200,000) for a loan that they paid $350,000 for. Therefore, OneWest will have made a profit of $90,000.

The reason that this situation creates a problem for a financially distressed homeowner seeking a short sale is that since the FDIC (per the information above) pays 80% of the losses of foreclosure there is no incentive for OneWest to mess around with a short sale unless they can make much more money. That is why they are demanding absurd short sale settlements and promissory notes from the homeowner. Of course, there is absolutely no incentive to offer a loan modification so that request would be dead on arrival.

According to Alexis McGee, "The scary thing is that over 50 banks have Shared Loss Agreements in place with the FDIC. Some of them include: Bank of America (go figure), CitiMortgage, Wells Fargo, etc." I have to agree. That is truly scary. I can already see the pain and anguish of hundreds of thousands, if not millions, of financially distressed homeowners as they are unnecessarily dragged through the foreclosure process.

The original blog post can be found at

The entire agreement between the FDIC and One West can be found at

More resources:

Join me in my fight. Read my Soap Box Alert to congress and while your there write your own.

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Does anyone know who is the investor (what company)for One West Bank? I'm trying to save my home and I need this information.


hoppefully they wont have it. keep fighting , they denied me to ,the bank indymac is crazy


That is exactly what I posted. I am trying to get this information out.

The shared loss agreement is something that the American public needs to know about. It is the very thing that is driving foreclosures and homeowners to homeless. The FDIC is fueling the foreclosure fire through this Shared Loss Agreement and NO ONE IS STOPPING IT!!! One must wonder why.

I have an Attorney that is helping me counter sue One West and their Investors (George Soros and Michael Dell) If anyone is interested in this Attorneys info or how you can join in the suite please email me at Together we can make a change!


please read this.... like to know how many senators , congress persons lost their homes or have problems with refinancing or modifications of their mortgage............with INDYMAC BANK /ONE WEST or they are getting to be foreclosed by ONE WEST/INDYMAC.I also like to know ,where is the one, who is/was responsible for giving away our money to the Banks ................especially Indymac Bank so WE THE PEOPLE CAN GET F.........

BY INDYMAC. Who was it ?....................................................................I like to know why Government purchased and sold Indymac Bank and where is the Government now ? Do we have government or not ? Where can we find one who is responsible for all these BS.......modification ....propaganda the bank should help struggling home owners they got are tax money whats going on in the world we need somone to help us fight for are rights we the consumers are being fraud on and having are houses taking , we need to stand up for justice and keep fighting there is alot of powerful people behind this thats why were getting fu----- scr----...think about it..who own the banks?

who looks after the banks? ok


everyone is being denied modifications why? do they get more money forclosing!!! somone needs to look into this and help familys stay in there home ,


what law firm for ct? please let me know ,they lied to me i will never trust them again..

we need help the owners are rich and they are still stealing are money and no one aint helping us.

please we need help . iam sure not buying anymore dell computers i got 1 every year this year no more iam going the other way , please do the same thank you


I feel like I'm reading my story over and over again!! We never even received an answer on our modifacation before our trustee sale date came and went.

We did everything we could, gave them everything they asked for when they asked for it...and the same answer everytime "it's in review". So now our home is REO and they are trying to get us to m ove out!!

I'm going to write mt congress like Frustrated sugested!! Good idea!!!


This is absolutely ridiculous. After the loss of my job and lack of success in obtaining a new one, we have been trying to short sell our home since July.

One West/Indymac has been nearly impossible to communicate with. We were assigned a negotiator on September 24th and have yet to hear anything from her, despite numerous attempts at emailing her directly and calling the customer service department every other day. Unfortunately, we lost our first offer due to lack of response from OW/Indy and are now waiting to hear about the 2nd offer.

After reading this, I'm doubtful anything will transpire. This is one of the most frustrating situations I have ever experienced.

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