Fort Worth Foreclosure Listings Include FDIC Homes- By: John Cutts
Fort Worth foreclosure listings now include homes seized by the U.S. Federal Deposit Insurance Corporation from Franklin Bank of Houston which collapsed last year.
The FDIC negotiated an agreement with Residential Credit Solutions, a home loan servicer based in Fort Worth, in which RCS spent $64.2 million to acquire a 50-percent share in approximately $1.3 billion in residential mortgages seized by the FDIC from Franklin Bank.
RCS will handle the loan portfolio, will service the home loans and split with the FDIC any income from the unpaid home loans. Under the agreement, RCS will also implement the Obama administration's loan modification program. According to an FDIC official, RCS was chosen to buy the 50-percent stake because it agreed to help prevent more foreclosures.
RCS was launched as a mortgage servicing and investment company in 2006 by investors that include New York-based hedge fund management firm Och-Ziff Capital Management Group and private equity company Equifin Capital Partners. Currently, it is managing $1.1 billion in residential loans, including nonperforming loans.
Dennis Stowe, CEO and president of RCS, said he and his partners formed RCS to handle and manage bad loans, so handling Fort Worth foreclosure listings from Franklin Bank is a perfect fit for them.
The agreement with the FDIC was made possible with help from the Public-Private Investment Program launched by the Treasury Department, Federal Reserve and the FDIC in March. The program has provided $727.8 million in government-backed note for the home loan portfolio acquisition at a rate of 4.25 percent. Funding for the program comes from the $700-billion bailout fund.
According to FDIC, if the partnership with RCS is successful, it will use the same strategy to help troubled banks eliminate their delinquent home loans that are pushing them to bankruptcy. FDIC said that currently, banks are being battered by up to $40 billion in bad mortgage debts.
The RCS agreement involves the sale of actual home loans and not mortgages packaged as mortgage-backed securities investments. RCS has offices in Los Angeles and New York and employs 115 professionals, with 94 employees working in Fort Worth.
According to bank officials, approximately 30 percent of Franklin Bank's home loans were nonperforming and that the percentage could increase because of the decline in home values. Out of all mortgages across the country, about 25 percent are already underwater.
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