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Why do you think that the banks are dragging their feet? Here’s the shocking secret – it’s called a “Shared-Loss” agreement. This agreement is with the FDIC, the government insurer. FDIC has this same agreement with around 50 banks. A couple of years ago a bank would do anything rather than get a foreclosed property back. Why now do they want them back? Because of their “Shared-Loss” agreement with the FDIC, they now make a profit on every foreclosure they get back. IndyMac’s agreement can be found at http://www.fdic.gov/about/freedom/IndyMacSharedLossAgrmt.pdf.
Here is an example from a One West/IndyMac foreclosure: One West would purchase the first mortgage for 70 percent and the line of credit for 58 percent. However, in the event that IndyMac gets the foreclosed property back, the FDIC covers approximately 80 to 95 percent of the loss, using the original loan amount, not what is currently owed. Many times this means they will make a profit of tens of thousands of dollars on an average foreclosed home. IndyMac/One West does not modify mortgages for this reason, but they also don’t come right out and say it. Also it is important to know that One West was created solely for the purpose of absorbing IndyMac. One of the partners, George Soros, was a major supporter of Barack Obama.
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