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Feds Move to Speed Sale of Failed S&L Assets

July 17, 1990

WASHINGTON (AP) _ Savings and loan bailout officials hope to speed the sale of distressed real estate and sour loans by mixing them with more attractive assets in multimillion-dollar packages.

A Bush administration board overseeing the bailout approved the new sales technique on a trial basis Monday. The Resolution Trust Corp. Oversight Board, headed by Treasury Secretary Nicholas F. Brady, authorized bulk sales totaling $2 billion.

The agency overseen by the board will put together portfolios of similar assets such as commercial loans, commercial real estate, apartment properties or apartment loans. The packages will include both good and problem assets.

Ed Kane, Ohio State University business professor and thrift expert, said $2 billion is a small amount compared with the huge volume of assets that need to be sold, but he praised the bulk sales concept.

″I think the important thing is to get these things out of the hands of the government, which is run for bureaucratic purposes, and put them into the hands of private people who can make decisions for entrepreneurial reasons. That will be best for the taxpayers in the long run,″ Kane said.

Bulk sales have been criticized by others, who label it a fire sale that could depress asset values by flooding the market.

However, Kane said, ″When you have the financial equivalent of a fire, a fire sale is the first thing you do.″

Selling properties one by one is ″terribly inefficient,″ he said.

In its first 11 months, the RTC has taken over about 460 failed S&Ls, selling or closing about 210 of them. But in S&L sales so far, the agency has been stuck with about half of the institutions’ assets, usually the delinquent loans and repossessed real estate.

The oversight board is permitting the bailout agency to lend portfolio buyers up to 85 percent of the purchase price for up to five years.

″Ideally we’d like it to be shorter term ... but we wanted to give (the agency) the flexibility,″ said Felisa Neuringer, an oversight board spokeswoman.

After the trust corporation completes $2 billion in sales, the oversight board will evaluate the program’s success and consider extending it.

On a related matter, the oversight board authorized the trust corporation to give some properties away to local governments and non-pofit agencies for use as day care centers, housing for the homeless or other public purposes.

Properties will be eligible for the program if the agency determines that the cost of holding and selling them exceeds their value.

Another part of the S&L bureaucracy, the Federal Housing Finance Board, announced approval of a $669 million housing program for low-income people.

The program, required by last year’s S&L bailout bill, is financed by the 12 regional Federal Home Loan Banks, which in turn are owned by the S&L industry.

The finance board, headed by Housing Secretary Jack Kemp, is spending $47.2 million from the home loan banks in combination with private and foundation funds and other government grants and loans.

The money will pay for 193 projects providing 13,706 housing units in 37 states. Much of it will be used to offer low-interest mortgage loans to low- income homebuyers through thrifts and banks.

Fred Webber, president of the U.S. League of Savings Institutions, the industry’s largest trade group, noted that the program would not exist without the industry-owned home loan banks.

It ″demonstrates that this nation needs a separate, healthy savings institution business to meet the need for decent, affordable housing,″ he said.

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