Bailout, BankofAmerica, Bear Stearns, Citigroup, Collapse, Congress, Credit Default Swaps, Derivatives, EMC, Fannie Mae, Federal Reserve, Freddie Mac, JP Morgan Chase, Lehman Brothers, MERS, Mortgage, Note, RESPA, Robo Signer, Securitization Fraud, Sub-Prime, TILA, Title Insurance, UCC, Wells Fargo
by Mario Kenny
DETROIT, MI – Wouldn’t it be fun to take the CEO’s of Chase, Bank
of America, Citibank and Wells Fargo, hold them somewhere with just the
bare living essentials and force them to negotiate loan modifications
and short sales with their own customer service departments to earn
their freedom? Imagine their frustration as they have to wait on hold forever,
speak with poorly trained, clueless staff who can’t find the documents
they’ve faxed or emailed for the umpteenth time and have to keep
It’d make a great movie! We could call it, “Groundhog Accountability Day for Bank Executives”.
“Sigh”. Unfortunately, that’s a fantasy and reality is what we have to deal with. Why are the big banks so difficult to deal with? Why don’t they seem
to understand that they lose more money when they foreclose on
properties than when they negotiate a loan modification or short sale?
Perhaps it’s we who really don’t understand where the money is made. Do you really think that banks are able to have 24/7 customer
service for credit cards and other loans, but can’t seem to come
anywhere near that for loan mods & short sales?
Do you really think, given technology that can track a package mailed to Timbuktu online, that faxes and emails really get lost? How hard is it really to
train someone to do a loan modification or short sale?
Consider this – Chase bought WAMU in September of 2008 for all of
$1.9 billion dollars. For that they got a bank with almost $310 billion
in assets, $188 billion of it bank deposits. Now Chase will tell you
that the deal wasn’t that great as they had to absorb a hemorrhaging
mortgage portfolio of $176 billion that they immediately wrote down by
$31 billion. That’s true, but hides what really is going on.
If you ignore all the other debt and assets, Chase got $176 billion
in home loans for $1.9 billion. That’s just over 1% of face value.
Assuming an average loan balance of around $300,000, that’s almost
600,000 mortgages and corresponding homes. That means they paid an
average of only $3,000 for each of those loans. Even if they foreclose
on the ENTIRE portfolio, do you think they can make money by reselling
houses they got for $3,000 each? In January of 2008, Bank of America paid $4 billion for Countrywide. Countrywide serviced about 9 million loans valued at $1.5 trillion dollars. Do you really want me to run the numbers on this deal?
The failed IndyMac Bank was sold earlier this year to a group
including George Soros and Michael Dell, under the name OneWest. Sheila
Bair, the head of the FDIC, had made IndyMac her personal guinea pig
project for testing out aggressive loan modifications to slow
foreclosures. OneWest issued a press release at the sale, stating they
would continue to pursue the FDIC’s loan modification and short sale
strategy. How long do you think that lasted? Try calling IndyMac now
for either and see how far you get. Better yet, call Dell computers and
ask them how you can customize your loan modification online just like
you can order a computer.
So what incentive do these banks really have to approve loan modifications and short sales?
Who created this financial bonanza for Wall Street? The financial
geniuses in Washington D.C. They could have put in place restrictions
and requirements tied to the purchase of these banks, but they didn’t.
Is this something they could have mistakenly overlooked? Not likely.
So, this means our wonderful administration in Washington is allowing
the banks to make money off the tax payers that bailed them out.
Nice. Now what are you going to do about it?