The Law of Unintended Consequences... OneWest, IndyMac and the FDIC

Most of you have probably seen this video regarding the “deal” that appears to have been struck by OneWest and the FDIC when OneWest purchased the assets of IndyMac last year.

Once you view the video, read the comments and the FDIC rebuttal you have to wonder what is the Federal Government thinking when it injects itself so heavily into what should be a FREE market system.

I don’t need to rehash the number of foreclosures that have occurred in the past two years or the number of projected foreclosures in the next couple of years. It has and looks like it will continue to be ugly.

In addition, almost every article written about the Government mortgage loan “modification” program suggests that it has been a dismal failure with very few homeowners actually having benefited from the program.

So, what does our Government do? Incentivize – read that as reward – at least one lender (OneWest)? If there is one, you know there are more. Should we spend time and money on a program that is helping too few and that has failed so many others? And, if that doesn’t work out once the overall losses pass a certain point, in OneWest’s case $2.5 Billion… the Government will then step in and make the bank not only “whole” but help to ensure it profits as part of the bargain.

The consequences of all of this Government “help” end up rewarding lenders for foreclosing and then reselling at a loss. How convenient!

What does this new found information mean to you as a real estate investor?

I wish I could read the tea leaves a little better… yet I will take a stab at a response.

Assuming that there is even an element of truth to the story in the above mentioned video, what this means to you and I is that the number of foreclosures is not going to stop, and yes we already knew that. But, now it appears that there is a true profit motive for lenders to continue the rate of foreclosures, regardless of what we hear in from the Government. And that means the supply of well priced properties, just what we as investors are looking for, will continue unabated.

Your job is to locate these great deals, take them down, execute your exit strategy and claim your profits!

Jump in and share your thoughts or further insight into the story this video tells.

Photo: kevincole

Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.