FDIC to Ramp Up Legacy Loan Sales

With its holdings of non-performing and performing mortgages beginning to swell, the Federal Deposit Insurance Corp. plans to hold more legacy loan auctions in the first-half of 2010. "We are continuing to develop the legacy sales program and gauging market interest in the program," said FDIC chairman Sheila Bair. The FDIC's board of directors is still working on several policy issues that need to be resolved, including eligibility requirements and how to prioritize institutions. FDIC has completed one legacy loan sale involving $1.3 billion of residential mortgages that belonged to the failed Franklin Bank in Houston. The winning bidder put up $64.2 million in cash to purchase a 50% equity stake in the pool and FDIC provided leverage financing for the purchase of the assets. But the Franklin sale involved a failed bank. FDIC wants open banks to use the 'Legacy' program to unload problem assets. "Cleansing balance sheets is absolutely necessary to strength the industry's capacity to lend to businesses and consumers," she said.