FDIC plans sale of failed bank RMBS

The Federal Deposit Insurance Corp. is set to sell $221.1 million of residential mortgage-backed securities held by failed banks, according to information on Bloomberg.

More than 70% of the mortgages are from Home Savings of America and at least a handful of other banks contributed at least 2% or more to the pool.

The deal is set to settle by March 27. 

Ron D’Vari, co-founder and CEO of NewOak Capital expressed the need for these types of transactions.

“Given the market appetite for yield being so high and the guarantee provides investors ultimate receipt of principal and timely coupon, t(). I expect the more sophisticated investors would be looking at this offering favorably and bid accordingly,” he told HousingWire.

The co-founder and CEO explained that these securities offer a different profile than newly originated government-sponsored enterprise RMBS. 

“The cash flows will be based on the workout strategy with borrowers and the ultimate resolution. The loans are at high LTV, typically over 100% LTV on average. With improving housing prices and severities, the principal schedule will be sooner than later,” D’Vari said.

He added, “In rising interest rate environment, the shortening of FDIC guaranteed transaction provides a good convexity profile.” 

Nationstar Mortgage Holdings (NSM) will be the servicer and the oversight advisor is Risk Management Group.

Jefferies Group (JEF) is managing the latest sale and the co-initial purchasers include The Williams Capital, M.R. Beal & Company and Amherst Holdings.

Andrew Gray, a spokesman for the FDIC, declined to comment.

In 2010, the FDIC closed on a sale of notes backed by RMBS from seven failed bank receiverships as part of a $1.8 billion structured financing transaction.

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