Residential Credit Solutions Wins Bid on Legacy Loan Pilot Sale
The Federal Deposit Insurance Corp. (FDIC) confirmed Residential Credit Solutions (RCS) as the winning bidder in the pilot sale of toxic mortgage loan assets through the Legacy Loans Program (LLP). The LLP, part of the Public-Private Investment Program (PPIP), was designed to attract private capital to buy up toxic loans. After postponing the program in June, the FDIC said at the end of July it would commence the initial pilot sale. RCS was one of 12 firms bidding on an ownership interest in a limited liability company into which the FDIC will place a portfolio of residential mortgage loans. Through its winning bid, RCS will service the mortgage loans, which bear an unpaid principal balance of $1.3bn. RCS will pay $64.2m for a 50% equity stake in the limited liability company, which will issue a note of $727.8m to the FDIC as receiver. FDIC said it expects to eventually sell the note. The FDIC owns the loans in the portfolio through its receivership of Franklin Bank, which regulators shut down in November 2008. RCS will manage the portfolio and service the loans in compliance with the guidelines of the Home Affordable Modification Program (HAMP), which allocates incentive caps for servicer participation in modifying borrowers' mortgages. RCS, which joined HAMP in June, received a $19.4m incentive cap through the Troubled Asset Relief Program (TARP). Write to Diana Golobay.