BUYING

WHOLE LOAN
POOLS
F. D. I. C.
DISTRESS INVESTOR TOOLKIT SERIES
VOL. II, NO. I
OLIVER WRIGHT ESQ.

Rescom strat.

RESCOM  STRAT.  -­‐  INVESTOR  TOOLKIT  VOL.  II,  NO.  I:  BUYING  FDIC  WHOLE  LOAN  POOLS  by  OLIVER  WRIGHT  ESQ
 FDIC LOAN
administered   by   its   Division   of   parQcular   loan   pool’s   projected   cash  
ResoluQons   and   Receiverships.   In   flows.
discharging   its   statutory   duty   as  
THE  RTC  BULK  SALES  
POOL SALES. receiver,   the   FDIC   must   resolve   bank  
liquidaQons  in  the  ‘least-­‐cost  manner.‘ PROGRAM
by  Oliver  Wright  Esq.
  THE  BACKGROUND. In   the   late   ‘80s,  the   ResoluQon   Trust  
Performing  and  Non-­‐Performing   Loans   CorporaQon,   be^er   known   by   the  
THE   FDIC  ASSET   MARKETING  
dwarf   all   other   asset   categories   held   acronym   RTC,   started   its   Bulk   Sales  
PROGRAM Program   in   the   wake   of   the   Savings  
by   failed   banks.   MulQply   this   by   a  
historic   number   of   failed   banks   and   and   Loan   crisis,  whose   epicenter   was  
The   FDIC’s   first   stab   at   selling   loans  
you   have   a   once   in   a   lifeQme   in   Texas,   but   enveloped   the   country.  
from  failed   banks   as   receiver   was   the  
inverstment  opportunity. Just   as   fortunes   were   lost   overnight,  
Asset   MarkeQng  Program   in   the   early  
so   too   were   millionaires   minted,  as  a  
‘ 8 0 s ,   w h i c h   b e g a n   m a r k e Q n g  
In   its   receivership   capacity,   the   FDIC   privileged   network   of   private,   third  
performing   loans   and   then   expanded  
sells   the   performing   and   non-­‐ party  bulk   sale   trade   pla`orms   raked  
into   nonperforming   a/k/a   ‘scratch-­‐
performing   notes   it   inherits   from   in   fortunes  coordinaQng  the   purchase  
and-­‐dent’   loans   as   well.   These   were  
failed   banks   to   the   private   sector   and   sale  of   failed   S  &  L   debt   at   steep  
packaged   into   whole  loan  pools  based  
through   a   number   of   loan   sale   discounts   to   par.   Like   the   Asset  
on   demographics   and   were   assigned  
p r o g r a m s   MarkeQng   Program,   the   Bulk   Sales  
values   and   minimum   reserve   prices  
Program   uQlized   a   straight   forward  
b a s e d   o n   t h e  
markeQng   process,   whereby   each  
agency   aggregated   and  
valued   similar   loans   into  
por`olios;   published   a   loan  
p o r ` o l i o   b i d d e r ' s  
informaQon   packet   outlining  
b i d   p r o c e d u r e s ,   b i d d e r  
cerQficaQon   protocols,   and  
confidenQality   requirements;  
and   ulQmately   sold   the   loan  
por`olios,   either   through   an  
aucQon   format   or   a   sealed   bid  
process.  As  the  volume   of  loans  
processed   through   both   the  
FDIC’s   Asset   MarkeQng   Program  
and   the   RTC’s   Bulk  Sales  Program  
reached   the   Qpping   point,   the  
FDIC   and   RTC   delegated   (while  
retaining   oversight)   much   of   the  
d i s p o s i Q o n   p i p e l i n e   t o   t h e  
aforemenQoned  third  parQes.

RESCOM  STRAT.  -­‐  INVESTOR  TOOLKIT  VOL.  II,  NO.  I:  BUYING  FDIC  WHOLE  LOAN  POOLS  by  OLIVER  WRIGHT  ESQ
 THE
1. Contributes   a  pool   of   performing   recovery-­‐-­‐equalling   the   sum   of   (i)   the  
and   non-­‐performing   scratch-­‐and-­‐ iniQal   sale   price   paid   by   the   winning  
dent   loans   to   a   Loan   Pool   SPE   bidder   (ii)  plus  the  FDIC’s  ParQcipaQon  
PROCESS. Limited  Liability  Company. Interest   i.e.,  its   porQon   of  the  ongoing  
revenue   stream   from   the   loan   pool  
FDIC BULK 2. Holds  back  a  parQcipaQon  interest   c o n t r i b u t e d   t o   t h e   L L C .   T h i s  
in   the   future   cash   flows   of   the   alternaQve   provides   liquidity   for   the  

LOAN SALES loan   pool   under   a   ParQcipaQon   FDIC's   Deposit   Insurance   Fund   and  
Agreement   executed   with   the   buffers   the   FDIC   and   American   tax  

THROUGH Loan  Pool  SPE  LLC. payer   from   underpayment   in   a  

depressed   and   uncertain   economic  
3. Sells  a  100%  Membership  Interest   climate,  without  which  the  FDIC   might  
THE PUBLIC- in   the   Loan   Pool   SPE   LLC   (which   be   forced   by   circumstance   to   accept  
represents  the  remaining   interest   unreasonably   consideraQon   due   to  

PRIVATE in   the   loan   pool   revenue   stream)   lack   of   price   discovery,   inefficient  
to  a  single  investor. asset   valuaQon,   and   opportunisQc  

PLACEMENT 4. Reduces   its   parQcipaQon   interest  

vulture  investors.

to   a   lower   payout   percentage  

PROGRAM once  it  recovers  a  certain  pre  
s e t   a m o u n t ,   t h u s  
increasing   the   future  
Under   the   FDIC’s   current   bulk   loan   amounts   received   by  the  
sale   process,   it   sells   its   very   largest   Loan  Pool  Buyer.
loan   pools   under   an  alternaQve  to   the  
direct   sale   program,  whereby   This   method   yields   the  
it:   FDIC   a  higher   return-­‐-­‐or  
‘ l e a s t   c o s t ’  

RESCOM  STRAT.  -­‐  INVESTOR  TOOLKIT  VOL.  II,  NO.  I:  BUYING  FDIC  WHOLE  LOAN  POOLS  by  OLIVER  WRIGHT  ESQ
 contract   servicer,   who   is   hired   by   the   terminates     one   year   aker   Loan   Pool  
THE Loan   Pool   Buyer   (subject   to   FDIC   Purchase,  with  the   Purchaser   and  FDIC  
PARTICULARS. approval)  as  part   of  the  loan   pool  bid   splilng   any   remaining   Advance  
process.   The   Loan   Pool   Buyer   must   Account   funds   proporQonate   to   their  
Deal Structure & provide   the   FDIC   with   aform   of   iniQal  cash  contribut  ions.

Execution Guaranty   from   a   financially   sound  

source   to  secure  the  obligaQons  of  the   Costs   incurred   by   the   Loan   Pool   SPE  
The   winning  bidder   (Loan   Pool   Buyer)   Loan  Pool  SPE  LLC  and  of  the  the  Loan   LLC   under  the  servicing   agreement  are  
must   form   its   own   special   purpose   Pool   Buyer   as   the   sole   Loan   Por`olio   the   sole   responsibility   of     the     Loan  
vehicle   (Pool   Purchase   SPE   /   Loan   Managing  Member. Pool  Buyer   and  may  not  be   passed   on  
Por`olio   Managing   Member)  to   both:   to   the  FDIC.   But   the   Loan   Pool   Buyer,  
(i)   buy   the   aforemenQoned   100%   If   the   Loan   Pool   consists   of   e.g.,   acQng   as   Loan   Por`olio   Managing  
membership   interest   in   the  Loan   Pool   c o n s t r u c Q o n   l o a n s   o r   o t h e r   Member,   can   take   a   monthly   pool  
SPE   LLC   (and   the   corresponding   loan   performing   loans   with   advance   management   fee.   Cash   advances  
pool’s   monthly   cash  flows)   and  (ii)   act   commitments,   the   Bidder/Purchaser   made   by   the   Loan   Pool   SPE   or   the  
as   the   LLC's   sole   Loan   Por`olio   and   the   FDIC   deposit   the   required   Servicer  for   e.g.,  foreclosure  expenses,  
Managing   Member.   Among   the   Loan   funds  into   an   Advance  Account   in   the   p r o p e r t y   p r e s e r v a Q o n   a n d  
Por`olio   Managing   Member’s   duQes   same   raQo   as  their   iniQal  parQcipaQon   maintenance  costs,  property  taxes  and  
iis  ensuring  that  the  loans  are  serviced   interests,  accessbible  to  the   Loan  Pool   costs  of  sale  are  reimbursed  according  
properly   by   an   FDIC   SPE   LLC,  in   accordance  with  the   terms   to  the  ParQcipaQon  Agreement.  
specified.   The   Advance   Account  
t y p i c a l l y  

The  Loan  Pool  SPE  LLC  must  

pay  out   the   FDIC’s  share   of  
all   cash   flows   received   from  
the   loan   pool   on   a   monthly  
basis   (net   of   any   expenses  
authorized   to   be   paid   or  
reimbursed   under   the   terms  
o f   t h e   P a r Q c i p a Q o n  
A g r e e m e n t   ) ,   a n d   m a y  
distribute   any   or   all   of   the  
remaining  cash  to  the   Loan  Pool  
Buyer   Purchaser,  as   it   deems  fit.  
The   Loan   Pool   Buyer   must  
provide   monthly   reports   to   the  
FDIC   concerning   pool   level   and  
loan  level  acQviQes.

RESCOM  STRAT.  -­‐  INVESTOR  TOOLKIT  VOL.  II,  NO.  I:  BUYING  FDIC  WHOLE  LOAN  POOLS  by  OLIVER  WRIGHT  ESQ
 THE  REQUIREMENTS. provides   the   Bidder’s   RepresentaQve   Bidderl  remains  eligible   to  submit   bids  
or   Agent  password  protected   access  to   on   future   sales,   subject   to   the   FDIC’s  
FDIC  LOAN  POOL  BIDDER  
electronic   copies   of   the   due   diligence   right  to  revoke  such  access.  
CERTIFICATION,   documents  and   underwriQng  
QUALIFCATION  &   files,   including   Any   bids   submi^ed   by   the   Loan   Pool  
DOCUMENTATION Bidder   must   be   best-­‐and-­‐final,  
nonconQngent,   and   submi^ed   on   an  
PotenQal   bidders   mus   t   first   all-­‐or-­‐nothing   basis,   meaning   that   the  
be   qualified   by   the   FDIC   in   FDIC   will  not  accept   anythng  short  of  a  
order   t   o   receive   informat   bid  on   all   the  loans   in  the  loan   pool   to  
ion   regarding   sales   and   be   contributed   to   the   Loan   Pool   SPE  
part   icipate   in   the   bid   LLC.   Nor   will   FDIC   permit   any   sale  
process,   which   requires   structure   other   than  that  proposed  by  
t   he   complet   ion   and   the  FDIC.  
submission   of   then   t h e  
following  documents  to  
t h e   F D I C :   C o n fi d e n Q a l i t y  
Agreement  Purchaser  El  igibi  l  i  t  y  Cert  
originaQon   l o a n  
ifi  cat  ion  -­‐   t  h   i  s  document  establishes  
documents,   credit   files   a n d  
t   h   a  t  t   h  e  potenQal  bidder   is  eligible  
servicing   records.   The   Loan   Pool  
to   purchase   assets   f   rom   the   FDIC   or  
any   enQty   controlled   by   the   FDIC,  
Bidder   QualificaQon   Request   —   this  
document  establishes  t  hat  t   he  potent   OLIVER   WRIGHT   ESQ.   is   an  
arbitrageur,   lawyer,   author   and  
ial  bidder  is  an  "accredited   inv  es   t   or  "   real  estate  investor   who  acquires,  
u  n   d   e  r    t  h  e    federal   securiQes  laws   manages   and   liquidates   scratch-­‐
and   has   (i)   t   he   knowledge   and   and-­‐dent   whole   loan   pools   and  
experience  i   n   financial   a  n   d  business   bulk   REO   asset   por=olios   for   high  
net   worth   and   private   equity  
ma^ers   so   as   to   be   capable   of  
investors.   As   a   principal   and   co-­‐
evaluaQng  the  merits  a  n   d     r  is  k  s    o  f   investor,  Oliver  has  executed  dozens  
purchasing     t  h  e  L  L  C  interest  and  (ii)   t   of  bulk  REO  asset   &   mortgage  note  pool  trades  with  large  
he   resources   t   o   purchase   such   naDonal  banks,  servicers  and  GSEs.  He  holds  Doctor  of  Law  
and  Master  of  Law  degrees  from  Cornell  Law  School,  where  
interest.  
he   graduated   with   honors   and   was  Editor   of   the   Cornell  
Law   Review.   He   holds   a   Bachelor’s   Degree   from   UCLA  
THE  PURCHASE.   where   he   was   class   major   valedictorian   and   graduated  
Summa  Cum  Laude,  Phi  Beta  Kappa.   He  is  coming  off  of  a  
F D I C   L O A N   P O O L   D U E   publishing   deal   with   Grove   (Cold   Mountain,   Black   Hawk  
DILIGENCE,BID   SUBMISSION   Down,   American   Psycho),   and   his   academic   research   &  
wriDngs  have  appeared  in  publicaDons  such  as  the  Harvard  
&  PURCHASE InternaConal   Journal   of   Press-­‐PoliCcs.   Oliver   is   a   former  
Once   the   FDIC   approves   the   above   Gibson  Dunn  &   Crutcher   corporate  and  trial  lawyer,   which  
documents,   and   upon   the   Loan   Pool   was  recently  voted  the  No.  1  LiDgaDon  Firm  in  the  Country.  
Bidder’s   Agent   or   RepresentaQve   Oliver’s   corporate,   regulatory,   debt   &   equity   capital  
market,   and  real  estate  investment   clients  over   the  years  
e x e c u Q n g   a   C o n fi d e n t a i l i t y   have  ranged  from  Barron  Hilton  to  PIMCO  to  Amazon.com.  
Agreeement,   the   FDIC   typically  

RESCOM  STRAT.  -­‐  INVESTOR  TOOLKIT  VOL.  II,  NO.  I:  BUYING  FDIC  WHOLE  LOAN  POOLS  by  OLIVER  WRIGHT  ESQ
 www.rescomstrat.com

855.699-6600
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RESCOM  STRAT.  -­‐  INVESTOR  TOOLKIT  VOL.  II,  NO.  I:  BUYING  FDIC  WHOLE  LOAN  POOLS  by  OLIVER  WRIGHT  ESQ