Why banks are slow to modify loans

Recently, your paper has printed some very interesting articles regarding the failed Government Mortgage plan. In the Dec. 11 article, "Gov't. mortgage plan provides little permanent help," The Associated Press wrote that Bank of America, which absorbed Countrywide and Merrill Lynch, has only completed 98 loan modifications - a number that should have been front page news.

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 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.

I suggest that if you have applied for a modification and have been denied that you take this information to the Illinois Attorney General at ag.state.il.us/consumers/.

Debra Seitz

Broker/owner

The County Land Company

Wasco