What if Your Lawyer is NOT Working Your Legal Case

What if Your Lawyer is NOT Working Your Legal Case


I’m Eric Lanigan an attorney in Winter Park. We’ve been in practice about 36 years, do
a great deal of real estate litigation which involves foreclosure defense. And in that area of foreclosure we’re constantly
being asked by our clients these days: why can’t I get a loan modification? Part of the answer is that loan modifications
are in and of themselves complete failures. In fact nationwide less than 5% of people
who apply for loan modifications get any kind of modification at all. And there’s several reasons for that. But here’s one that often applies to mortgages
in commercial properties and it’s called loss share arrangements. And this is how it works…you often hear
about a bank takeover where the FDIC comes in and takes over a failed bank and another
bank immediately comes in and takes over the old bank. And I’ve often wondered, how do they do that
so fast? And isn’t that acquiring bank taking on a
huge risk? What we’ve come to find out is that they’re
actually taking on no risk. In fact they’re virtually guaranteeing themselves
a profit. And here’s how it works. The FDIC and the acquiring bank enter into
what it commonly called a loss share agreement. And it might better be called a “profit guarantee
arangement.” And here’s how it works. The FDIC essentially agrees to cover somewhere
between 80 and 95 percent of the losses that the acquiring bank incurs. Let me give you an example. Let’s say the acquiring bank acquires a million
dollar loan. That’s what’s on the books, that it’s a million
dollar loan. They pay $300,000 for that loan and they later
find out that the property is only worth $100,000 and the loan goes into default. Well, the question then becomes, how much
has that acquiring bank lost? Well if you were in Sister Theresa’s third
grade arithmetic class with me you would have come to a very simple conclusion. You would have said, they paid 300, they got
100 for the property so they lost $200,000. But that’s not what happens because under
these so called loss share agreements what FDIC has done is said we’re insuring the difference
between the book value of the loan and what you ultimately recover for the value of the
property. Well, the book value of the loan is one million
dollars. What the bank ultimately recovered on the
property was $100,000. Well then they say FDIC says, you’ve lost
$900,000. And we’re going to pay 80 percent of that,
that’s $720,000. So what the bank ends up with is $100,000
in property and $720,000 from the FDIC. That’s not exactly loss sharing. That sounds to me like profit guaranteeing. So when the bank’s dealing with you in an
attempt to renegotiate your loan, the bank has a choice: go through the bank negotiating
process with you or double their money with the FDIC. Well guess what? You lose. However, there is a silver lining and that
is the exposure of the loss share agreement and its terms can be a real game changer in
the foreclosure process. So if you have a loan, commercial or in fact
residential, and the bank that originally lent you the money failed and was taken over
by another bank, then you need to know whether or not that arrangement is covered under a
loss share agreement. What are the terms of that loss share agreement
and how much money has the acquiring bank actually recovered or stand to recover on
your loan?

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