[Federal Register Volume 61, Number 143 (Wednesday, July 24, 1996)]
[Notices]
[Pages 38466-38469]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-18820]
-----------------------------------------------------------------------
[[Page 38467]]
DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
[Docket No. FR-4117-N-01]
Office of the Assistant Secretary for Housing-Federal Housing
Commissioner; Notice of Sale of HUD-Held Multifamily Mortgage Loans
AGENCY: Office of the Assistant Secretary for Housing-Federal Housing
Commissioner, HUD.
ACTION: Notice of North and Central Regions nonperforming mortgage loan
sale.
-----------------------------------------------------------------------
SUMMARY: This notice announces the Department's intention to sell
unsubsidized mortgage loans (Mortgage Loans), without Federal Housing
Administration (FHA) insurance. The Mortgage Loans are classified as
nonperforming or subperforming, and are secured by properties located
primarily throughout the north and central regions of the United
States. 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 June 1996 to
qualified bidders. Closing is expected in mid-August to mid-September.
ADDRESSES: Bidders' Information Packages will be available from FHA's
Financial Advisor, Cushman & Wakefield, by contacting John Howley, at
202-467-0600. 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 will be available for
review by qualified bidders at the due diligence facility located at
1800 M Street, NW., Suite 300-South, Washington, DC 20036, beginning
June 17, 1996. The facility will close on July 26, 1996. The facility
will be open to qualified bidders between the hours of 9:00 a.m. and
6:00 p.m., EDT, Monday through Friday. Access to the facility can be
arranged by contacting Rick Copeland, Tradewinds International, Inc.,
by telephone 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, SW., 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: The Mortgage Loans encumber properties
located in 23 states and the District of Columbia, with a significant
number of such properties concentrated in the north and central regions
of the United States (Maryland, Ohio, Pennsylvania, Indiana, District
of Columbia, Virginia, Connecticut, Massachusetts, Tennessee, Rhode
Island and Kentucky). A final listing of the specific properties
involved in the Sale is included in the Bidders' Information Package.
The Mortgage Loans have experienced varying levels of delinquency; some
are subject to provisional workout agreements. The Department reserves
the right to add Mortgage Loans to the Sale that are not secured by
properties in these jurisdictions.
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 2 or more
Mortgage Loans). Further, a bidder may condition acceptance of its bids
for individual Mortgage Loans upon being the successful bidder of
Mortgage Loans with a minimum aggregate unpaid principal balance. The
Department will accept those bids that optimize the gross proceeds from
the Sale.
The Bidding Process
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 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 on 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). Bidders' Information Packages have been available since
June 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.
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. The successful
bidders will be notified within 5 business days after the Bid Date
(Award Date). An additional deposit will be required from each
successful bidder within 2 business days after the Award Date. This
additional 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 additional 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 additional deposit
must total 10 percent of the aggregate unpaid principal of all of the
bidder's successful pool bids.
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 September 18, 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 additional deposit (plus accrued interest) from the
successful bidder.
These are expected to be the essential terms of 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
[[Page 38468]]
additional details. To ensure a competitive bidding process, the terms
of sale are not subject to negotiation.
Due Diligence Facility
During the 6 week period prior to the Bid Date, a 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.
Timely 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, earnest money 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.
Status of Mortgage Loans
As of June 1, 1996, significantly all of the Mortgage Loans were
classified as delinquent or subperforming because they had been
delinquent at least once within the past 12 months. Mortgage Loans may
become performing on or before the date that title is transferred to
the successful bidder. The Department reserves the right to include in
the sale current Mortgage Loans.
Application of Replacement Reserve and Certain Escrows
If a Mortgage Loan is delinquent at the time of closing, to the
extent the Department determines is permissible, the Department will
apply to the amount due the Department under the Mortgage Loan funds in
the replacement reserve and other escrow accounts. Thereafter, the
balances in the replacement reserve and escrow accounts, if any, 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
governed by the regulatory agreement and will be returned to the
mortgagor in accordance with such terms and conditions as may be
established by the Department, and all other replacement reserve and
escrow accounts will be transferred to the new mortgagee.
Qualification of Bidders/Ineligible Bidders
Qualified bidders, 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 which 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 and/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, consultant or agent;
(5) Any individual that was a principal and/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 the Mortgage
Loans;
(7) Any entity or individual that served as a loan servicer or
performed other services for, or on behalf of the Department, with
respect to any of the Mortgage Loans included in the Sale at any time
during the 2-year period prior to July 30, 1996, or any affiliate
thereof; and
(8) Any individual that was a principal and/or employee of any
entity or individual described in paragraph (7) above at any time
during the 2-year period prior to July 30, 1996.
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 any 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 any liability.
Mortgage Loan Sale Policy
Significantly 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 that, pursuant to final
regulations governing FHA mortgage loan sales, published in the Federal
Register on March 21, 1996 (61 FR 11684) (Mortgage Sale Regulations),
the Mortgage Loans will be sold without FHA insurance. The Mortgage
Sale Regulations also provide for the exclusion of certain 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 (61 FR 11690, Sec. 290.35).
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 there are any such Mortgage Loans, they will be removed
from this Sale.
The Department selected a competitive auction as the method to sell
the Mortgage Loans primarily to satisfy the requirements of the
Mortgage Sale Regulations (61 FR 11690, Sec. 290.30). This method of
sale also 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
[[Page 38469]]
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 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 (i) the harm premature release of this
information will have upon bidders and (ii) the harm to the American
taxpayer by fettering the Department's ability to comply with the
specific mandates of the Multifamily Housing Property Disposition
Reform Act of 1994 to reduce losses to the FHA fund through mortgage
sales.
Given the foregoing, the Department's policy with respect to
Freedom Of Information Act requests is as follows:
(i) The Department has determined that after the Award Date it will
disclose the aggregate number of bidders and the aggregated proceeds
the Department expects from the sale, as well as the bid information
materials that the Department provided to the bidders (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 by
each successful bidder of 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 North and Central Regions Nonperforming
Mortgage Loan Sale, and does not establish the Department's policy for
the sale of any other mortgage loans.
Dated: July 18, 1996.
Stephanie A. Smith,
Acting General Deputy Assistant Secretary for Housing--Federal Housing
Commissioner.
[FR Doc. 96-18820 Filed 7-23-96; 8:45 am]
BILLING CODE 4210-27-P
