$1.12 Billion in Loans on FDIC's Auction Block

The Federal Deposit Insurance Corp. (FDIC) plans to seek bids for about $1.12 billion of commercial and residential real estate loans as part of the agency’s sale of assets seized from failed banks.

The scheduled sales are composed partly of $351 million of debt related to commercial properties, according to preliminary announcements.

Since May 2008, the FDIC has completed at least 18 structured-asset sales, auctioning stakes in loans with a total face value of $21.2 billion. Bank failures have totaled 127 in the U.S. this year, as souring residential and commercial property loans impair the companies’ capital.

Finance experts said that it’s sensible for the FDIC to try and manage its assets in this way. Because people don’t want to own those assets, there’s an opportunity to buy them at attractive prices. In September, Mariner Holdings LLC bought part of a $762 million portfolio of property loans from the FDIC. A unit of Mariner, a Leawood, Kan.-based asset manager, paid $52 million for a 40 percent stake in the portfolio.

However, buyers for the debt--a mix of performing and overdue loans--must meet qualification requirements, including the payment of a $250,000 due-diligence deposit. The portfolios will be sold as structured transactions, meaning the FDIC will share ownership and proceeds with the winning bidder.

Cleveland’s AmTrust Bank and Columbus, Ind.-based Irwin Union Bank & Trust Co. are among the failed banks whose loans are in the planned sales. Irwin Union was closed on September 18, 2009; AmTrust was taken over by federal regulators on December 4. Bids are due November 16.