The Federal Deposit Insurance Corp. (FDIC) is contemplating securitizing at least $10 billion of delinquent and underperforming whole loans belonging to failed banks in the first quarter, according to investment banking sources who have been briefed about the plan.

These sources, requesting their names not be used, said the bond issuance could rise to as much as $30 billion.

The FDIC will be the issuer of record on the MBS. "Right now it's a prototype they're talking about," said a source.

At press time, the agency had not returned telephone calls about the matter. The FDIC has hired former secondary market executives that worked for UBS Securities and Option One Mortgage to advise them on the securitization process, said one advisor.

"These are smart guys who know their way around the securitization business," he said.

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