The Federal Deposit Insurance Corp. (FDIC) is preparing $2 billion worth of structured asset sales that will hit the market shortly, a top agency official said Thursday.
Speaking at a distressed asset conference sponsored by National Mortgage News, FDIC deputy director Pamela Farwig advised investors, “If you’re interested in structured sales with the FDIC…I would very quickly get prequalified.”
Roughly 322 banks failed between 2008 and June 2011 with another 45 slated for the scrap heap by yearend. While more than 90% of failed bank assets are acquired by other FDIC-insured depositories, the agency must liquidate the remaining holdings, which include distressed real estate loans and even land.
Increasingly, the agency has turned to structured sales with private investors, said Farwig, who’s in charge of asset marketing for the agency’s resolutions and receivership division.
Although the pace of bank failures has slowed this year, the FDIC is still quite busy, she said. (The 348 banks that failed from 2008 through the first quarter of 2011 had $636.1 billion of assets.)
By prequalifying, investors have an opportunity to be notified of upcoming auctions and to place bids, Farwig noted. Prequalification is free – but any investor has to put down $250,000 if it wants to bid on an offering. New deals come up frequently, she said, so speed is essential to the process.
With structured sales, the FDIC becomes a partner with the investor through a limited liability corporation that can last up to 10 years for single-family residential portfolios. “These are long-term commitments, I want to stress that,” Farwig said.
The FDIC scores each incoming bid based on the specific needs of a deal to “ensure you have the specific expertise to manage that portfolio,” Farwig said. Ultimately, the highest qualified bid wins.