Bank refuses bid of $150,000 on foreclosure, buys back for $200,001

[zoog]

The somewhat short version:

Woman tries to sell house of late father starting at $179,000, about what was owed on the mortgage. Keeps lowering the price, but the bank says they won't approve any offer below $150,000. Finally gets a $150,000 offer but Fannie Mae, who really holds the mortgage, says no. House goes up for auction, bank bids one dollar over the highest bid, takes house back for $200,001.

It was also learned that Flagstar received $266 million in government bailout money.
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“It makes no economic sense when you think about the scenario that you described. If you take a step back, though, and you take a look at where Fannie Mae is today, one of the things Fannie Mae is attempting to do is to avoid the appearance that they have less money than they actually have,” Rheingold said.

“All these losses can’t hit the books,” said Signor. “It’s better for them to take it back into inventory, close the doors, winterize it and sit on it, rather than take the loss.”

http://www.katu.com/news/business/115353794.html

[jk]

Re: Bank refuses bid of $150,000 on foreclosure, buys back for $200,001

we don't know how many loans they would have to write down if they took this loss. this way they can continue to mark to make-believe.

[thriftyandboringinohio]

Re: Bank refuses bid of $150,000 on foreclosure, buys back for $200,001

we don't know how many loans they would have to write down if they took this loss. this way they can continue to mark to make-believe.

+1

[c1ue]

Re: Bank refuses bid of $150,000 on foreclosure, buys back for $200,001

we don't know how many loans they would have to write down if they took this loss. this way they can continue to mark to make-believe.

Don't forget that even loans not being paid continue to generate 'profits' via 'interest paid' and 'fees paid'.

So it isn't even a solvency issue, there is real bonus money to be made.

[jtabeb]

Re: Bank refuses bid of $150,000 on foreclosure, buys back for $200,001

Yeah, except that it is all fictitious.

[cmalbatros]

Re: Bank refuses bid of $150,000 on foreclosure, buys back for $200,001

Don't forget that even loans not being paid continue to generate 'profits' via 'interest paid' and 'fees paid'.

Suspected for a long time , it's all about the cash flow. Got to have cash to pay bonuses etc.

[sunskyfan]

Re: Bank refuses bid of $150,000 on foreclosure, buys back for $200,001

What amazes me is that the title of the article focuses on the bewilderment by the seller and the realtor. Just like most of the American people they refuse to believe the obvious.

[c1ue]

Re: Bank refuses bid of $150,000 on foreclosure, buys back for $200,001

Yeah, except that it is all fictitious.

Ah, but what is reality?

The extra zeros created by the Fed are real, but the extra zeros created by banks on non-paid loans are not?

[goodrich4bk]

Re: Bank refuses bid of $150,000 on foreclosure, buys back for $200,001

Don't forget that even loans not being paid continue to generate 'profits' via 'interest paid' and 'fees paid'.

So it isn't even a solvency issue, there is real bonus money to be made.

Even under mark-to-myth a bank must recognize a gain/loss when the loan is liquidated via a foreclosure sale. So if the bank is the successful bidder, the amount of the credit bid -- here 201,000---is booked as a repayment of the loan. The story suggests the loan balance was less, thereby giving Fannie a "profit" on the loan consisting of all back interest and a capital gain.

Of course, if the home is worth only $150,000, Fannie may have a future loss baked into the cake, so to speak. But the story suggests there was another cash bidder at the sale, suggesting that the home was worth more than $200,00, perhaps significantly more given that most cash bidders at foreclosure sales are looking for a discount to FMV.

I don't know enough about this particular transaction to judge what's really going on, but I've seen this exact same scenario dozens of times here in California. A free subscription to foreclosureradar.com and three days of looking through their database and anybody can see this for themselves: Fannie is bidding full loan values for properties that are almost always worth much less. They are minimizing their current losses and creating larger ones in the future when they attempt to re-sell their REOs. I consider it bank fraud. Regulators who have been told to ignore such can-kicking consider it good politics.

[zoog]

Re: Bank refuses bid of $150,000 on foreclosure, buys back for $200,001

...I don't know enough about this particular transaction to judge what's really going on, but I've seen this exact same scenario dozens of times here in California. A free subscription to foreclosureradar.com and three days of looking through their database and anybody can see this for themselves: Fannie is bidding full loan values for properties that are almost always worth much less. They are minimizing their current losses and creating larger ones in the future when they attempt to re-sell their REOs. I consider it bank fraud. Regulators who have been told to ignore such can-kicking consider it good politics.

Yes this is certainly happening at a large scale. They are generating fictitious cash-flow and "balancing" the books with buy-backs for the short-term, pushing what should be real and considerable losses out to the long-term. This is the kind of monkeyshines that caused the crash in the first place. As we often lament, it seems nothing has really changed. The FIRE economy is desperately plowing ahead with business as usual.

What amazes me is that the title of the article focuses on the bewilderment by the seller and the realtor. Just like most of the American people they refuse to believe the obvious.

Right. Also, the title ("Realtor, home seller baffled when bank rejects its own offer") made me think the bank had offered to buy back the home, then changed their mind. Just one of many facets of the decline in quality journalism is confusing or at times even intentionally misleading titles. This frequently happens on iTulip too though... everyone loves to be a sensationalist.

[cjppjc]

Re: Bank refuses bid of $150,000 on foreclosure, buys back for $200,001

There is something wrong with the whole story. The house only had offers at $150,000, but then goes to auction and someone bids $200,000 cash? Then the bank bids $200,001? Why not take the $200,000 if it was there.

[runlikehe11]

Re: Bank refuses bid of $150,000 on foreclosure, buys back for $200,001

It looks like Flagstar Bank set the value at 150,000 for the short sale not Fannie.
There has been a growing trend at the courthouse step foreclosure auctions.
The foreclosing institution will set a low bid and also a high bid. So it is possible that whoever bid the 200,000 bid above the minimum bid but not to the high bid,
that the note holder would go up to if it had competition.
When all the fees/interest/kitchen sink are tacked onto the note, is it very seldom today to not see a foreclosure that the banks don't like.

Now the REO dept. might be a different story

[c1ue]

Re: Bank refuses bid of $150,000 on foreclosure, buys back for $200,001

Even under mark-to-myth a bank must recognize a gain/loss when the loan is liquidated via a foreclosure sale. So if the bank is the successful bidder, the amount of the credit bid -- here 201,000---is booked as a repayment of the loan. The story suggests the loan balance was less, thereby giving Fannie a "profit" on the loan consisting of all back interest and a capital gain.

Of course, if the home is worth only $150,000, Fannie may have a future loss baked into the cake, so to speak. But the story suggests there was another cash bidder at the sale, suggesting that the home was worth more than $200,00, perhaps significantly more given that most cash bidders at foreclosure sales are looking for a discount to FMV.

I don't know enough about this particular transaction to judge what's really going on, but I've seen this exact same scenario dozens of times here in California. A free subscription to foreclosureradar.com and three days of looking through their database and anybody can see this for themselves: Fannie is bidding full loan values for properties that are almost always worth much less. They are minimizing their current losses and creating larger ones in the future when they attempt to re-sell their REOs. I consider it bank fraud. Regulators who have been told to ignore such can-kicking consider it good politics.

I agree, even under mark to fantasy, once foreclosed on the bank must recognize the loss.

However, the trick isn't to not foreclose. The trick is to make the foreclosure section as understaffed, overworked, and inefficient as possible. To deny all loan modifications.

Because systemically the longer the 'book' of bad loans exists, the larger the 'profits'.

The 'buy back' is just another unintended (?) symptom of the combination of mark to fantasy and unlimited ZIRP funds.