Synovus Ousts Senior V.P. of Asset Management; Shady Foreclosure Deals to Blame?
Have you ever wondered what happens to houses when the banks foreclose? The Fort Myers News Press recently wondered just that, and its findings may have prompted the termination of a high-ranking bank officer.
To those in the foreclosure industry in the Tampa area, Michael E. Johnson was fairly well-known. He was the Senior Vice President of Asset Management for Synovus Bank. This was no phony title, like the “Assistant Secretary” designations we see given to robo-signers; Mike Johnson was the decision-maker on foreclosure cases for Synovus in the Tampa area. To illustrate, here was the signature on his emails (copied and pasted from an email he sent me):
I personally dealt with Mike Johnson on several occasions in recent years, and it was clear to me that if a settlement agreement was going to be reached in a case involving Synovus, he would be the one approving it. This dynamic was both good and bad. It was good because, unlike many foreclosure cases, at least there was a person at the bank with settlement authority with whom communication was possible. It was bad because, frankly, he and I butted heads frequently and, in my view, he was rather stubborn in negotiating. (Of course, I’m confident he thought the same things about me.) That was his reputation, at least as I knew it – difficult to deal with, but Synovus liked him because he got a lot of deals done for the bank.
Anyway, with that backdrop in place, I find this article from the Fort Myers News Press particularly interesting. Essentially, this journalist studied the Public Records in Lee County to investigate what happened to properties after being foreclosed, or after they went to the bank. According to the article, there was a disturbing trend of properties being sold by Synovus to third-party investment companies, then flipped soon thereafter for a significant profit.
In my view, the information contained in the article forces some tough questions:
1. Why would Synovus sell a house for $53,000 to an investment company when said company was able to sell the house two months later for $78,000? Or a duplex in Lehigh Acres for $30,000 that was re-sold 15 days later for $79,000? Seriously, think about those numbers for a minute. More than doubling the sale price? Merely by doing a flip? 15 days later? For a bank that was so stubborn in negotiating with homeowners, why not insist on a higher sale price (to the investor)?
I suppose it’s possible the investment company did significant repairs to improve the value of the property. However, as the article notes, how much work can really be done when no building permits were obtained?
2. Doesn’t this have the feel of a shady, back-room deal? After all, why would a bank sell a house for $30,000 if it was possible to sell it 15 days later for $79,000? We may never know for sure, but it sure is interesting that Synovus had numerous deals like this with the same investor, and Mike Johnson was the one approving most of these deals.
Think about that for a minute. One man approving multiple sales of properties to the same investor, which investor was flipping those properties for a profit.
When you put it like that, it’s not hard to wonder whether this banker had a had a personal stake in these transactions. To be clear, I don’t know this to be the case, and I’m not saying that was the case, but when the same bank is selling multiple properties to the same investor, at prices like this, it’s not hard to wonder whether that banker was getting a kickback on the re-sale. It sure wouldn’t have been difficult – investor simply tells banker “sell this to me for $30,000, and I’ll give you $5,000 on the re-sale.”
You may think I’m reaching or just plain wrong, and maybe so. However, it sure is interesting that Mike Johnson no longer works for Synovus, having been let go (after what had apparently been a distinguished career with the bank) shortly after this article came out. In fact, according to my sources, he now works with investment companies who buy houses from banks!
The point here isn’t to talk about this one banker, of course. My point is that it’s terribly, indescribably sad to know that Florida homeowners are being foreclosed and this is what’s happening with their homes. Even if there was nothing shady going on with Synovus, it’s awful to know that banks are so willing to foreclose on homeowners yet so willing to sell properties for a fraction of their actual value. Anything shady, of course, only increases the level of misery.
3. I’m also troubled at what may be attempts to increase the extent of the homeowner’s liability. Using the example from the article, should the prior homeowner be liable to Synovus for $275,000, i.e. $328,000 (the judgment amount) minus $53,000 (the alleged value of the house)? Apparently, by my read of the article, that’s what the court ruled, as that $53,000 sale price is how the fair market value was determined. The fact that the house sold for $78,000 sale price two months later (and that the deficiency amount probably should have been $23,000 lower? The court may not even have known about that re-sale. Heck, the homeowner may not even have known.
This prompts a serious question … Are banks selling properties at reduced values to increase the amounts of their deficiency judgments against homeowners?
You might think that makes no sense. After all, why would a bank sell a house for less than its maximum sale price? That said, do we really know what, if any, back-room deals are going on here? For instance, is this deal an arms-length transaction when Synovus is selling many such properties to the same investor? Who’s to say there weren’t other, under-the table monies changing hands?
It’s not hard to envision ways Synovus could artificially increase the liability of homeowners … ”you give me a better deal on this one; I’ll give you a better deal on that one,” or “give me a deal for $30,000 on this one, and I’ll give you half of the profits on the resale.”
I don’t think I’m the type of person who espouses conspiracy theories. However, I just can’t help but wonder, given what I’ve read, seen, and know, if homeowners are getting screwed on a routine and systematic basis by bankers who aren’t looking out for anyone except themselves. And when a high-ranking banker is suddenly ousted after an article like this, it really raises some difficult questions.
Mark Stopawww.stayinmyhome.com
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