FDIC Preparing Whole Loan Sale
Washington-The Federal Deposit Insurance Corp. was set to hold the first round of bidding on a $1.4 billion portfolio of whole loans recently, a sign that the nonperforming loan market could be heating up.
One hedge fund executive, requesting anonymity, said roughly 35% of the mortgages are delinquent but the agency hopes to recover up to 55 cents on the dollar.
He added that bidders are required to post $250,000 in earnest money "which allows you to get to know the collateral." The deposit money is refundable.
The portfolio also includes performing mortgages. Most of the loans belong to the now-defunct Franklin Bank of Texas, whose largest shareholder was Lewis Ranieri, co-inventor of the mortgage-backed security.
Royal Bank of Scotland's Connecticut office is believed to be serving as advisor on the deal. Both RBS and FDIC officials could not be reached for comment at press time.
Bidders familiar with the offering say the agency will help finance the deal by using an equity-sharing arrangement where the government can participate if the loans perform better than expected.
In other FDIC auction news, DebtX is selling $288 million worth of mostly commercial mortgage loans but only is allowing banks to bid on the assets. The loans were culled from nine different receivership banks, including First Bank of Beverly Hills. DebtX manager Ken Daley did not return a telephone call about the auction.