Home / News / Government / FDIC Requests Comment on Legacy Asset Purchase Program
Print This Post Print This Post

FDIC Requests Comment on Legacy Asset Purchase Program

The ""FDIC"":http://www.fdic.gov announced last week that it is seeking public comment on its ""Legacy Loans Program"":http://www.fdic.gov/llp/LLPtermsheet.pdf (LLP). The FDIC and the Department of the Treasury unveiled the LLP last Monday as part of the administration's ""Public-Private Investment Program"":http://www.fdic.gov/llp/LLPFactSheet.pdf (PPIP).
The program is intended to boost private demand for distressed assets that are currently held by banks and facilitate market-priced sales of troubled mortgage assets. According to the FDIC, a structured program for removing these loans from banks' books is necessary because uncertainty about the value of such assets makes it difficult for banks to raise capital and secure stable funding to support lending to households and businesses.
The LLP will combine an FDIC guarantee of debt financing with equity capital from the private sector and the Treasury. The partnerships will purchase assets from banks and place them into what will be known as Public-Private Investment Funds (PPIF).
Institutions of all sizes will be eligible to participate in the LLP to sell assets. Government officials say they expect a range of investors to participate, including individuals, mutual funds, pension plans, insurance companies, and other long-term institutional investors. Investors will be pre-qualified by the FDIC to participate in auctions of the legacy assets.
For providing a guarantee, the FDIC will be paid a fee, a portion of which will be allocated to the agency's Deposit Insurance Fund. The FDIC said it will be protected against losses by the equity in the pool, the newly established value of the pool's assets, and the fees collected.
The FDIC will play an ongoing reporting, oversight, and accounting role under the program. In addition, the FDIC will structure the debt that the selling bank will take back when the legacy loans are sold. Participant banks may then resell the debt into the market.
The FDIC is seeking public comment from interested parties on the critical aspects of the LLP. Comments are requested no later than April 10. For more details on the program and to review and submit comments ""click here"":http://www.fdic.gov/llp/index.html.

About Author: Carrie Bay

Carrie Bay is a freelance writer for DS News and its sister publication MReport. She served as online editor for DSNews.com from 2008 through 2011. Prior to joining DS News and the Five Star organization, she managed public relations, marketing, and media relations initiatives for several B2B companies in the financial services, technology, and telecommunications industries. She also wrote for retail and nonprofit organizations upon graduating from Texas A&M University with degrees in journalism and English.

Check Also

HUD Grants $150M to Tribal Communities for New, Affordable Housing

“Strong investments in Tribal communities help ensure residents can access much-needed safe and affordable housing,” said Secretary Marcia L. Fudge. “The funds HUD is making available will meet the challenges of today and allow Tribal communities to make innovative and vital advancements needed to prepare for the future."