Frequently Asked Questions

How can I buy loans from the FDIC?

The FDIC conducts loan sales with the assistance of loan sale advisors. When the FDIC has loans available for sale, it markets them on one of the four loan sale advisors’ websites. To participate in a loan sale, please contact each of the loan sale advisors and register on their respective websites to receive sale announcements.
 

Prospective bidders may also provide contact and investor status information and identify the types of financial assets, loans, and loan-related assets they are interested in purchasing by completing the Prospective Bidder Information form and delivering the completed form electronically to: prospectivepurchaser@fdic.gov. Prospective bidders that submit the form will have their names included on a list to receive sale announcements that match their expressed interests.

Additional information on the loan sale process can be found at Loan Sales.

 

How does a joint venture transaction work?

 

• The receiver forms a limited liability company (LLC), or other entity, and conveys assets from one or more failed bank receiverships to the LLC.
• In exchange for the assets, the receivership is issued all (100 percent) of the equity interest in the LLC.
• The winning bidder, also known as the private owner, purchases from the receivership a portion, typically ranging from 20 to 40 percent, of the equity in the LLC. The actual percentage is specific to each transaction.
• Depending upon how the transaction is offered, the LLC may be leveraged, in which case the receivership will receive debt issued by the LLC in addition to the LLC’s equity upon the conveyance of the assets to the LLC.
• In certain cases, the receiver may make borrowing facilities or pre-funded accounts available to allow the LLC to fund construction draws with respect to the assets and meet its working capital needs.
• Cash flow from the assets, after deducting the monthly management fee, asset-related expenses, and other eligible expenses, are allocated first to pay off any notes issued by the LLC to the receiver in a leveraged transaction and any other debt outstanding to the receiver and, then, to the receiver and the private owner, in accordance with their percentage interests.

How does a leveraged transaction work?

 

• Leveraged transactions include financing in the form of either amortizing or non-amortizing notes issued by the LLC as partial payment for the assets conveyed by the receiver. The notes may be guaranteed by the FDIC, in its corporate capacity, in case the receiver should decide to sell the notes in the secondary market.
• Financing terms are determined by the risk and cash flow characteristics of the joint venture's underlying pool of assets.
• Generally, the notes must be paid off before the equity owners receive any distributions.

What is required to review files or obtain specific information on the loans in a given sale?

Prior to access being given to loan files or data containing borrower identity-related information, a prospective purchaser must register on the loan sale advisor’s website. As part of the registration process, a prospective purchaser must:

 

• Agree to the Confidentiality Agreement that is provided on the loan sale advisor’s website. Prospective purchasers can review a sample copy of the Confidentiality Agreement at the following link: Confidentiality Agreement,
• Have a minimum net worth of $1 million,
• Execute an Office of Foreign Assets Control (OFAC) Certification,
• Wire a $50,000 refundable security deposit, and
• Execute a Security Deposit Agreement.

The loan sale advisor may charge a fee for vetting a prospective purchaser’s qualifications.

These requirements are in place to ensure the prospective purchaser is eligible to buy loans from the FDIC, to protect the borrowers’ sensitive and personally identifiable information, and to confirm the prospective purchaser’s financial ability to close.

 

How can I become a qualified bidder?

Prospective bidders will be required to meet transaction-specific qualification criteria. As a general matter, the transaction-specific qualification process will require prospective bidders to complete, to the satisfaction of the FDIC, and return the following executed documents:

 

• Confidentiality Agreement
• Qualification Request
• Purchaser Eligibility Certification (PEC)

The FDIC also runs a search with the Office of Foreign Assets Control (OFAC) of the U.S. Department of Treasury on potential qualified bidders prior to bid sheet distribution.

Note: In addition to bidder qualification documentation required by the FDIC, investor-specific requirement and approvals may also apply.

What is the auction sale process?

 

• Potential bidders are solicited directly or through public announcement.
• Interested bidders are qualified (e.g. Confidentiality Agreement, Qualification Request, PEC, OFAC certification).
• Upon receipt of an earnest money deposit, qualified bidders are provided access to due diligence material approximately 30 days in advance of the auction bid date.
• During the due diligence process, bidders are reviewed by the investor including the GSEs and Ginnie Mae, if investor approval is required.
• Bids are reviewed and the winning bidder is typically confirmed via phone and email.
• Transaction closing documents are typically executed within 2 weeks of bid date, and servicing transferred within 30 days.

What types of securities does the FDIC sell?

 

• United States Treasury securities
• Federal agency securities
• Residential or commercial mortgage-backed securities
• Other asset-backed securities
• Public and private equity
• Corporate, municipal, and sovereign debt
• Structured finance instruments
• Limited partnership interests, typically associated with Community Reinvestment Act investments
• Derivative instruments

What is the auction sale process?

 

• Potential bidders are identified and qualified (e.g. Qualification Request, Purchaser Eligibility Certification, Office of Foreign Assets Control certification).
• Bid Sheets are distributed to qualified bidders generally one week prior to the auction date describing the terms of the auction.
• Bids are reviewed and awarded to the winning bidder; winning bid is typically confirmed via phone and email.
• The FDIC’s securities custodian handles all trade ticket and settlement procedures with the buyer and interacts with FDIC accounting; sales typically settle in two to three business days, (i.e. “T plus 3”).