[Federal Register Volume 61, Number 222 (Friday, November 15, 1996)]
[Notices]
[Pages 58585-58587]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-29385]
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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
[Docket No. FR-4168-N-01]
Notice of Sale of HUD-Held Multifamily Mortgage Loans
AGENCY: Office of the Assistant Secretary for Housing-Federal Housing
Commissioner, HUD.
ACTION: Notice of Midwest sale of multifamily unsubsidized mortgage
Loans.
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SUMMARY: This notice announces the Department's intention to sell
unsubsidized mortgage loans (Mortgage Loans), without Federal Housing
Administration (FHA) insurance. The majority of the Mortgage Loans are
secured by properties located throughout the Midwest region of the
United States, with an additional significant concentration located in
the New York-New Jersey area. The Mortgage Loans will be offered for
sale on a whole loan basis, in a competitive auction. This notice
describes the bidding process for these Mortgage Loans. The Mortgage
Loans will be offered for sale only to qualified bidders.
DATES: Bidders' Information Packages will be available in late October,
1996 to qualified bidders. Bidding is expected to take place on
December 12-13, 1996, and closing is expected to take place from late-
December, 1996 to mid-February, 1997.
ADDRESSES AND CONTACTS: Bidders' Information Packages will be available
from FHA's Financial Advisor, Cushman & Wakefield. Bidders' Information
Packages and information about individual Mortgage Loans (Bid
Materials) will be made available only to parties who complete a
Confidentiality Agreement and Bidder Qualification Statement and are
deemed qualified bidders. To obtain a Confidentiality Agreement and
Bidder Qualification Statement contact John Howley at Cushman &
Wakefield, at 202-467-0600. Bidders' Information Packages will be
forwarded by regular mail unless a party makes special arrangements to
receive the information through expedited delivery.
Asset Review Files for all the Mortgage Loans are expected to be
available for review by qualified bidders at the due diligence facility
located at 1800 M Street, N.W., Suite 300-South, Washington, D.C.
20036, beginning October 28, 1996. The facility will close on or about
December 11, 1996. The facility will be open to qualified bidders
between the hours of 9:00 a.m. and 6:00 p.m., Eastern Time, Monday
through Friday. Access to the facility can be arranged by contacting
Rick Copeland, at Tradewinds International, Inc., HUD's due diligence
contractor, at (202) 530-0841 Ext. 29. Asset review files may also be
ordered from Tradewinds International, Inc. and sent to qualified
bidders in the manner described in the Bidders' Information Package.
FOR FURTHER INFORMATION CONTACT: Audrey Hinton, Associate Director for
Program Operations, Office of Multifamily Asset Management and
Disposition, Room 6160, Department of Housing and Urban Development,
451 Seventh Street, S.W., Washington, DC 20410; telephone (202) 708-
3730 Ext. 2691. Hearing or speech impaired individuals may call (202)
708-4594 (TTY). These are not toll-free numbers.
SUPPLEMENTARY INFORMATION:
Status of Mortgage Loans
The Mortgage Loans encumber properties located in 25 states, with a
significant number of such properties concentrated in the midwest
region of the United States, particularly Illinois and Michigan. A
listing of the specific properties involved in the Sale will be
included in the Bidders' Information Package.
The Mortgage Loans have experienced varying levels of delinquency.
As of September 1, 1996, most of the Mortgage Loans were classified as
nonperforming or subperforming because they had been delinquent at
least once within the past 12 months. Several of the Mortgage Loans,
however, are performing, i.e., they have been current in their monthly
payments for the last 12 consecutive months. Mortgage Loans included in
this Sale that are now current may become in default on or before the
date that title is transferred to the successful bidder, while Mortgage
Loans included in this Sale that are now in default may become current
on or before such date.
Certain Mortgage Loans are subject to provisional workout
agreements.
The Bidding Process
General
The Department will offer qualified bidders an opportunity to bid
competitively on the Mortgage Loans. Bids may be offered for one or all
of the Mortgage Loans, as well as for any combination of the Mortgage
Loans. More particularly, a bidder may bid on as many individual
Mortgage Loans as the bidder chooses. However, no bidder may bid on
more than 20 pools of Mortgage Loans (i.e., combinations of two (2) or
more Mortgage Loans). Further, a bidder may condition acceptance of its
bids upon its being the successful bidder of Mortgage Loans with either
(or both) a minimum or a maximum aggregate unpaid principal balance.
The Department will accept those conforming bids that optimize the
gross proceeds from the Sale.
Bidders' Information Package
The Bidders' Information Package describes in detail the procedures
for participating in the Sale and includes bid forms, a loan sale
agreement (Loan Sale Agreement), and certain
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information concerning each of the Mortgage Loans, such as the unpaid
principal balance and interest rate. Also included in the Bidders'
Information Package is a computer diskette with general portfolio
information and selected data fields related to each Mortgage Loan.
The Department will distribute the Bidders' Information Packages
for a period of approximately 6 weeks prior to the date that bids are
due (Bid Date). We expect Bidders' Information Packages to be available
on October 23, 1996. The Bidders' Information Package may be
supplemented from time to time prior to the Bid Date. Interested
parties may request a Bidders' Information Package as described above.
Bid Dates
We expect the bidding to take place on December 12-13, 1996.
Deposits. Bidders must include a 5 percent Initial Deposit with their
bids. If a bidder submits multiple bids, the Initial Deposit will be
limited to 5 percent of the bidder's single largest bid amount. The
Initial Deposit for a bidder who has created a pool or a number of
pools (but not more than 20 pools as provided above) is limited to 5
percent of the single largest bid amount of the bidder's pool bids.
Except as set forth in the Loan Sale Agreement, the successful bidders
will be notified within three business days after the Bid Date (Award
Date). An additional deposit (Final Deposit) will be required from each
successful bidder within 2 business days after the Award Date. The
Final Deposit when added to the Initial Deposit must total 10 percent
of the bidder's successful bids. More specifically, if a bidder submits
multiple individual bids, the Final Deposit when added to the Initial
Deposit must total 10 percent of the aggregate unpaid principal of all
of the bidder's successful bids. Similarly, if a bidder submits a pool
bid or multiple pool bids, the Final Deposit must total 10 percent of
the aggregate unpaid principal of all of the bidder's successful pool
bids.
Timeliness and Conformity of Bids and Deposits
Each bidder assumes all risks of loss relating to its own bidding
mistakes and its failure to deliver, or cause to be delivered, on a
timely basis and in the manner specified by the department, each bid
form, deposit and loan sale agreement required to be submitted by the
bidder.
Ties for High Bidder
In the event there is a tie for a high bid, the Department, through
its Financial Advisor, will contact the parties with the tie bid and
afford each of them an opportunity to offer a best and final bid. The
successful bidder will be the one with the highest bid. If a tie
continues after the best and final offers are submitted or the bidders
do not respond, or do not respond within the time period established by
the Department, the successful bidder will be determined by lottery.
Notwithstanding the above, the Department reserves the right to
withdraw any Mortgage Loan(s) subject to a tie bid.
Closing
The Department will assign its interest in a Mortgage Loan to a
successful bidder at the closing, which is expected to occur no later
than February 15, 1996. If the successful bidder fails to abide by the
terms of the Loan Sale Agreement, including paying the Department any
remaining sums due pursuant to the Loan Sale Agreement and closing on
an agreed upon date within the time period provided by the Loan Sale
Agreement, the Department shall retain as liquidated damages the
Initial and Final Deposit (plus accrued interest) from the successful
bidder.
Note. These are expected to be the essential terms of the Sale,
but are subject to change. Information regarding any such changes
along with any other supplements to the Bidders' Information Package
will be made available to parties who request and obtain a Bidders'
Information Package. The Loan Sale Agreement, which is included in
the Bidders' Information Package, provides additional details. To
ensure a competitive bidding process, the terms of sale are not
subject to negotiation.
Qualification of Bidders/Ineligible Bidders
Qualified bidders, who are interested parties who have such
knowledge and experience in financial and business matters so as to be
capable of evaluating the merits and risks of acquiring the Mortgage
Loans, and who are not otherwise ineligible to bid (as described
below), may bid on the Mortgage Loans.
The following individuals and entities (either alone or in
combination with others) are ineligible to bid on any one or
combination of the Mortgage Loans included in the Sale:
(1) Any individual or entity debarred from doing business with the
Department pursuant to 24 CFR part 24;
(2) Any employee of the Department, any member of any such
employee's household, and any entity controlled by any such employee or
member of such an employee's household;
(3) Any person or entity that employs or uses the services of an
employee of the Department (other than in such employee's official
capacity) either: (a) who is involved in the Sale, or (b) to assist in
the preparation of a bid for the Mortgage Loans;
(4) Any contractor, subcontractor, advisor or consultant (including
any agent of the foregoing) who performed services for or on behalf of
the Department in connection with the Sale, or any affiliate of any
such contractor, subcontractor, advisor, consultant or agent;
(5) Any individual that was a principal or employee of any entity
or individual described in paragraph (4) above at any time during which
the entity or individual performed services for or on behalf of the
Department in connection with the Sale;
(6) Any individual or entity that uses the services of any person
described in paragraph (5) above in preparing its bid on any Mortgage
Loan(s).
Furthermore, any entity or individual that served as a loan
servicer or performed other services for or on behalf of the Department
at any time during the 2-year period prior to December 12, 1996 with
respect to any Mortgage Loan included in the Sale is ineligible to bid
on such Mortgage Loan. The following also are ineligible to bid on such
Mortgage Loan: (a) any affiliate or principal of such entity or
individual described in the sentence above, (b) any employee or
subcontractor of such entity or individual during that 2-year period,
or (c) any entity or individual that employs or uses the services of
any other entity or individual described in this paragraph in preparing
its bid on such Mortgage Loan.
Due Diligence Facility
During the 6-week period prior to the Bid Date, the due diligence
facility will be open to prospective qualified bidders, at which the
Department will provide information such as environmental and title
reports and market data. The address of the facility is specified
above. The Department reserves the right to charge a reasonable fee to
recover its costs in duplicating and forwarding any information
requested by an interested party, as well as an access fee to the due
diligence facility, which will be credited to the purchase of any Asset
Review Files.
Application of Replacement Reserve and Certain Escrows
If a Mortgage Loan is delinquent at the time of the Sale, to the
extent the
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Department determines it is permissible, the Department will apply
funds in the replacement reserve and miscellaneous escrow accounts to
the amount due to the Department under the Mortgage Loan. Any remaining
balances in the replacement reserve and any escrow accounts will be
transferred to the new mortgagee. If a Mortgage Loan is current at the
time of closing, the funds in the replacement reserve account will be
returned to the mortgagor in accordance with such terms and conditions
as may be established by the Department.
FHA Reservation of Rights
The Department reserves the right to withdraw Mortgage Loans from
the Sale and to terminate the Sale at any time, for any reason, and
without liability, prior to the Award Date, without prejudice to its
right to include any withdrawn Mortgage Loan in a future sale.
The Department also reserves the right to reject any and all bids,
in its sole discretion, for any reason, and without liability.
The Department reserves the right to include in the Sale additional
Mortgage Loans.
Mortgage Loan Sale Policy
Almost all of the Mortgage Loans are nonperforming or
subperforming. All of the Mortgage Loans are unsubsidized, and there is
no project-based Section 8 assistance on any of the projects.
Therefore, the Department has determined, pursuant to regulations
governing FHA mortgage loan sales, published at 24 CFR part 290,
Subpart B (Mortgage Sale Regulations), that the Mortgage Loans will be
sold without FHA insurance. The Mortgage Sale Regulations provide for
the exclusion of delinquent unsubsidized mortgages from sales where it
appears that (1) foreclosure appears unavoidable, and (2) the project
is occupied by very low-income tenants who are not receiving housing
assistance and would be likely to pay rent in excess of 30 percent of
their adjusted monthly income if the mortgage were to be sold and
foreclosed (24 CFR 290.35(b)). The Department's interpretation of this
provision is set forth in the preamble to the February 6, 1996 interim
rule (61 FR 4580-81). The Department has made an administrative
determination that the Mortgage Loans do not meet the criteria for
exclusion. If the Department determines that any Mortgage Loans meet
such criteria, they will be removed from this Sale.
The Department selected a competitive auction as the method to sell
the Mortgage Loans in accordance with the requirements of the Mortgage
Sale Regulations (e.g., 24 CFR 290.30). This method of sale optimizes
the Department's return on the sale of these Mortgage Loans, affords
the greatest opportunity for all qualified bidders to bid on the
Mortgage Loans, and provides the quickest and most efficient vehicle
for the Department to dispose of the Mortgage Loans.
At one time, the Department considered and discussed with industry
participants a loan sale procedure that afforded the borrowers the
opportunity to acquire their Mortgage Loans on a noncompetitive basis
prior to the Department's offering the Mortgage Loans for sale to
others (Borrower Settlement Option). For the reasons set forth above,
however, the Department decided to dispose of these Mortgage Loans
through a competitive auction.
Freedom of Information Requests
The Department has approved a policy for responding to Freedom of
Information Act requests for information on the Department's
multifamily mortgage loan sales. The purpose of this policy is to
clarify for the public and potential purchasers the types of sales
information that will be disclosed in connection with the Department's
multifamily mortgage sales program. The policy strikes a balance
between the Department's policy of disclosing as much information as
possible to the public and its interest in minimizing the harm
premature release of this information will have upon bidders, and the
harm that release of sensitive and confidential financial information
would have on the effectiveness of HUD's loan sale programs, and thus,
on the American taxpayer.
Given the forgoing, the Department's policy with respect to Freedom
of Information Act requests is summarized as follows:
(i) The Department has determined that after the Award Date it will
disclose the aggregate number of bidders and the aggregate proceeds the
Department expects from the Sale, as well as the bid information
materials that the Department provided to the bidders (provided they
are not subject to a privacy or confidentiality exemption).
(ii) After all sales are closed the Department will release: (a) a
list of all who received bid materials, (b) a list of all bidders, (c)
a list of all winning bidders, and (d) the aggregate amount paid for
each successful bid on multiple mortgage loans (whether bid as a pool
or otherwise).
(iii) No earlier than one year after all of the sales are closed,
the Department will disclose individual winning mortgage loan bid
prices.
Scope of Notice
This notice applies to the Midwest Sale of Multifamily Unsubsidized
Mortgage Loans, and does not establish the Department's policy for the
sale of any other mortgage loans.
Dated: November 8, 1996.
Stephanie A. Smith,
General Deputy Assistant Secretary for Housing, Federal Housing
Commissioner.
[FR Doc. 96-29385 Filed 11-14-96; 8:45 am]
BILLING CODE 4210-27-P
