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FDIC Taps Secondary Market to Sell $409M in Failed Banks’ Home Loans

The ""FDIC"":http://www.fdic.gov has amassed a large portfolio of underperforming real estate loans seized from failed banks over the last couple of years, and the closings just keep on coming. This weekend, the 2010 failed-bank tally ""surpassed the 100-mark"":http://dsnews.comarticles/regulators-shut-down-seven-more-banks-as-2010-failures-surpass-100-2010-07-26.
[IMAGE] While the FDIC has managed to broker deals with most acquiring institutions recently to absorb ""essentially all"" of the failed banks' loans, some transaction announcements from the federal agency do still contain the language, ""the FDIC will retain the remaining assets for later disposition,"" further adding to the regulator's stockpile of loan leftovers.


In order to fast-track the disposition of these assets â€" most of which are the nonperforming loans that acquiring institutions did not want to be saddled with â€" the FDIC is turning to private investors in the secondary market.

The federal agency has put together an offering of $409 million of residential mortgage bonds originated or acquired by 17 failed financial institutions, according to a ""_Wall Street Journal_ report"":http://online.wsj.com/article/SB10001424052748704249004575385274221389054.html. The deal, identified as FDIC 2010-R1, will be wrapped by an FDIC guarantee and is expected to price mid-week, the paper said.

The ""Royal Bank of Scotland"":http://www.rbs.co.uk is serving as the agent putting the securitizations together for the FDIC.

Last year, the banking regulator began auctioning off loans from failed bank takeovers via structured partnerships with private companies, where the FDIC retains partial ownership and shares in any future returns on the assets.

But the agency has seen success with several secondary market deals for residential and commercial real estate assets already, so securitizations may become the disposition du jour as the FDIC continues to deal with an elevated number of bank closings and engorged holdings of nonperforming loans.

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.

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