WASHINGTON (AP) -- The Federal Deposit Insurance Corp. has sold $490.7 million in troubled mortgage loans from 19 banks that failed between August 2008 and March 2009 as it works through an inventory of assets from the institutions it has taken over.
The FDIC said Thursday that the winning bidder in its auction, Charlotte, N.C.-based Roundpoint Mortgage Servicing Corp., paid $34.4 million for a 50 percent stake in a new company set up to hold the home mortgage loans. The FDIC has the other 50 percent.
"RoundPoint Mortgage Servicing Corp. successfully bid for an equity interest stake in the assets of failed banks in an auction held by the Federal Deposit Insurance Corp. (FDIC).
The equity interest stake, pooled together from 19 failed banks in FDIC receivership and titled Multibank Structured Transaction Single Family Residential 2010-1, sold for $34.4M.
Collectively, the loans have an unpaid principal balance of approximately $490.7M...."
"The RoundPoint bid equates to 42% of the unpaid principal balance of the portfolio, and the servicer will be responsible for managing the loans.
The 19 participating FDIC receiverships provided financing to Multibank by issuing approximately $137.5M of corporate guaranteed notes. The FDIC guaranteed notes will receive payments of interest and principal on a monthly basis."
"This is one of the legacy loans program sales with 2 to 1 leverage. The FDIC provides a guaranteed non-recourse loan of $137.5 million and puts up an equity stake of $34.4 million. The private investor Roundpoint Mortgage Servicing puts up $34.4 million. The total purchase price is $34.4 + $34.4 + $137.5 = $206.3 million. Since par is $490.7, then the sales price is $206.3/$490.7 = 42% of par. See my paper about these FDIC transactions at ssrn.com/abstract=1476333.
How is the FDIC offloading these assets? They are getting 7c on the dollar ($34.4M) on the unpaid value of the assets, guaranteeing debt on another $137.5M of notes being written by the 19 participating receiverships, and providing financing for the balance! From my seat, it looks like the risk to the FDIC is only reduced by the 7c on the dollar of equity that RoundPoint contributed! The balance is either financed by, or guaranteed by the FDIC. But maybe the FDIC gets to move these assets off their balance sheet now? Probably... And people were all over Lehman Brothers for the Repo 105 transactions... This FDIC smoke and mirrors game does little to reduce their exposure.