InfoBytes, September 18, 2010 - Weekly In-depth review of news & developments in the financial services industry

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Topics In This Issue

• Federal Issues

• State Issues

• Courts

• Firm News

• Mortgages

• Banking

• Consumer Finance

• Securities

• Litigation

• Privacy/Data Security

Excerpt from "Federal Issues"

FDIC Conducts Pilot Sale of Receivership Assets Under the Legacy Loan Program. On September 16, the Federal Deposit Insurance Corporation (FDIC) announced that it signed a bid confirmation letter with Residential Credit Solutions (RCS), which submitted the winning bid in the FDIC’s pilot sale of receivership assets under the Legacy Loans Program (LLP). The pilot sale, conducted on August 31, 2009, consisted of 12 bidders competing to purchase a limited liability company (LLC) holding a portfolio of residential mortgage loans with an unpaid principal balance of approximately $1.3 billion owned by the FDIC as Receiver of Franklin Bank, SSB, Houston, Texas. Bidders for the pilot sale had the option to leverage their bids with LLP funds at 6-to-1 or 4-to-1, or to submit a cash bid for a 20 percent ownership interest. Ultimately, the winning bidder, RCS, financed the sale using the 6-to-1 leverage option, paying a total of $64,215,000 in cash for a 50 percent equity stake in the LLC. The LLC will issue a note of $727,770,000 to the FDIC as Receiver, guaranteed by FDIC in its corporate capacity. Based on the FDIC’s analysis and assumptions, the present value of RCS’ bid equals 70.63 percent of the outstanding principal balance of the portfolio. Once the deal closes, RCS will manage the portfolio and service the loans consistent with the Home Affordable Modification Program (HAMP) guidelines.

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