Offering the lure of cheap government-guaranteed financing, the Federal Deposit Insurance Corporation moved to push its efforts to have private investors buy distressed mortgages from troubled banks. Agency officials announced that they had reached a deal to sell $1.3 billion in mortgages from Franklin Bank, a Houston-based lender that failed last November and was taken over by the F.D.I.C.
It was the first deal reached under an Obama administration program announced this spring to help banks sell their problem loans, clean up their balance sheets and get credit flowing again.
But even though the F.D.I.C. is providing generous subsidies that could cost taxpayers heavily in the future, banks have generally refused to sell their troubled mortgages at the steeply discounted prices that bargain-hunting investors have demanded.
The deal announced on Wednesday is an effort to break that logjam, but it does not involve a solvent bank selling its assets and might not offer enough taxpayer-financed sweeteners to bridge the gap between the prices banks want and the prices investors will pay.
Under the deal, the F.D.I.C. will create a joint venture with Residential Credit Solutions of Fort Worth, a three-year-old company founded by Dennis Stowe, a veteran of the subprime mortgage industry.
Residential Credit will put up $64 million of its own money to obtain a 50 percent stake in the venture, which will hold and manage the $1.3 billion pool of mortgages from Franklin Bank.
Read the whole story: New York Times
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