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FDIC appears to be moving forward with its plans to securitize commercial real estate loans it takes from banks that fail.
The agency recently issued a request for proposals from investment banks willing to help it structure and sell bonds from its proposed securitizations. News of the RFPs was first reported by Reuters.
The FDIC would appear to be following RTC's footsteps in securitizing mortgages. During the savings and loan crisis in the early 1990s, that agency had pioneered the securitization of both performing and nonperforming commercial mortgages. Its nonperforming transactions, issued under its N-series, involved the RTC selling a 49 percent equity stake in a portfolio of loans at a discount to an investor and financing the sale through the issuance of notes backed by the loans.
It's not known whether FDIC plans to follow the same template. The agency thus far has relied on acquiring institutions, taking the bulk of failed banks' assets. And what's left it has generally sold through structured offerings and whole-loan sales.
During the first half of the year, 86 banks with $71.3 billion of assets were seized by the federal government. But their acquirers took $62.9 billion of their assets, with the FDIC providing a back-stop against losses for $50.7 billion of assets.
But more and more banks that fail are being brought down by their commercial real estate portfolios. And Sheila Bair, the agency's chairman, earlier this year said that securitization would play a role in the FDIC's disposition plans.
The securitization program would be different from the agency's efforts to sell, through the bond market, the debt that it provides buyers of bank assets that it sells through its structured offerings. Of the $4 billion of debt it provided to buyers of those portfolios, the agency so far has sold $2.4 billion. That debt usually carries no interest, so the agency sells it at a discount to par. It also guarantees payment of the debt.
Comments? E-mail Orest Mandzy or call him at (215) 504-2860, Ext. 211.
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