I have seen this before, but this video is full of misconceptions and falsehoods and has no foundation in truth whatsoever. 

The video was so popular, however, that the FDIC took the rare step of refuting the claims by releasing the following statement:

 

FDIC Director of Public Affairs Andrew Gray said, "It is unfortunate but necessary to respond to blatantly false claims in a web video that is being circulated about the loss-sharing agreement between the FDIC and OneWest Bank. Here are the facts: OneWest has not been paid one penny by the FDIC in loss-share claims. The loss-share agreement is limited to 7% of the total assets that OneWest services, and OneWest must first take more than $2.5 billion in losses before it can make a loss-share claim on owned assets. In order to be paid through loss share, OneWest must have adhered to the Home Affordable Modification Program (HAMP).

The producers of this video perpetuate other falsehoods. The FDIC has not requested to borrow money from the Treasury Department. Indeed, we continue to be funded by the banking industry through assessments, not by taxpayers as claimed in the video.

This video has no credibility. Regardless of the personal or professional motivations behind its production, there is always a responsibility to be factually correct and transparent. The FDIC made available a fact sheet on the day that the sale of IndyMac was announced that details the terms of the contract. It's too bad that the creators of this video opted to premise it on falsehoods."

 

The FDIC also issued this statement, which represents terms of the sale which contradict statements in the video, and should clear up some of the confusion fostered by the various inaccuracies in the video:

 

Supplemental Facts about the Sale of Indymac F.S.B. to OneWest Bank

 

• IndyMac was competitively bid. After analysis, the acquisition by OneWest represented the least cost transaction to the Deposit Insurance Fund.
• OneWest not only acquired assets, but also assumed the liabilities of the insured deposits, Federal Home Loan Bank Advances, and amounts owed the FDIC
• OneWest has assumed a first loss position on a portfolio of qualifying loans where they take the first 20% of losses before any loss share payments are made. This is a first loss position of over $2.5 billion.
• The FDIC has yet to make a single loss share payment to OneWest.
• In its agreement with FDIC, OneWest is required to adhere to a loan modification protocol for single family loans that meets the approval of the FDIC. If the FDIC determines that OneWest is in violation of this agreement, then the FDIC can repudiate the loss share claims on the covered loans.
• FDIC has authorized OneWest to service single family loans under the Home Affordable Modification Program. It applies to all owner-occupied homes and requires OneWest to:
  • follow HAMP procedures to develop affordable loan modification terms for the borrower
  • determine whether the recovery on a modified loan is higher than the recovery from a short sale or foreclosure
  • modify the loan using HAMP guidelines if the recovery of a modification is higher than the recovery of a short sale or foreclosure
  • loss share coverage cannot be factored into any recovery calculation for loan modification, short sale or foreclosure.
• The FDIC monitors OneWest's compliance with their adherence to the FDIC Mortgage Loan Modification Program and OneWest's commitments under the asset sale agreement.
• Only 7% of loans OneWest services are owned by OneWest and covered under loss share. Other institutions own the remaining 93% of loans OneWest services. These loans are required to be serviced in accordance with the owner institutions' agreements with OneWest.
  

 

 

So what I think is that this is just another lesson that teaches us that you can't always believe what you see or read on the internet!  The makers of this video either did not understand the terms of the transaction due to misreading it or just made up lies, but since they appear confident about what they are talking about, people believed it.

(If you are not inclined to believe the FDIC, fair-minded financial blogger Calcualted Risk called this video "obviously inaccurate" and praised the FDIC for shedding light on the falsehoods in this video.)

 

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