95-23396. Notice of Sale of Defaulted Title I Loans

[Federal Register Volume 60, Number 183 (Thursday, September 21, 1995)]
[Notices]
[Pages 49152-49153]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-23396]




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Part X





Department of Housing and Urban Development





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Notice of Sale of Defaulted Title I Loans; Notice

Federal Register / Vol. 60, No. 183 / Thursday, September 21, 1995 / 
Notices 

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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

Office of the Assistant Secretary for Housing-Federal Housing 
Commissioner
[Docket No. FR-3953-N-01]


Notice of Sale of Defaulted Title I Loans

AGENCY: Office of the Assistant Secretary for Housing-Federal Housing 
Commissioner, Department of Housing and Urban Development.

ACTION: Notice of Sale of Defaulted Title I Loans.

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SUMMARY: This notice announces the Department's intention to sell 
defaulted Title I loans by sealed bid. The loans were insured under the 
provisions of section 2 of title I of the National Housing Act (12 
U.S.C. 1703). Each loan was made for either the alteration, repair or 
improvement of property, or for the purchase of a manufactured home. 
This notice also describes the bidding process for these loans. This is 
a notice of a sale of three pools of loans. It is not an offer to sell 
the loans. Offers will only be made individually to those interested 
parties that have executed a Confidentiality Agreement and a Bidder 
Qualification Statement that are accepted by the Department.

DATES: Bid Packages will be available on or about September 25, 1995. 
The loan sale will occur on or about November 6, 1995.

ADDRESSES: To obtain a Bid Package interested parties must obtain and 
execute both a Confidentiality Agreement and a Bidder Qualification 
Statement. Interested parties can obtain these documents from: FHA 
Information Center, 135 Center Street, Bristol, CT 06010, telephone 1-
800-877-4814, FAX [phone]. (This FAX number is not a toll-free 
number.) Upon receipt of an executed Confidentiality Agreement and a 
Bidder Qualification Statement, a Bid Package will be forwarded by 
regular mail. Interested parties may make special arrangements to 
receive a Bid Package the next day.

FOR FURTHER INFORMATION CONTACT: William Richbourg, Office of the 
Housing-FHA Comptroller, Room 5146, Department of Housing and Urban 
Development, 451 Seventh Street, SW., Washington, DC 20410; telephone 
[phone], ext. 2727. Hearing or speech-impaired individuals may 
call [phone] (TDD). These are not toll-free numbers.

SUPPLEMENTARY INFORMATION: The Department intends to sell three pools 
of approximately 16,000 defaulted Title I loans. The majority of loans 
are unsecured and nonperforming. A loan is considered to be 
nonperforming if fewer than 10 of the previous 12 scheduled payments 
have been made. Some nonperforming loans do generate cash flows from 
borrower payments. A list of specific loans and pool descriptions will 
be contained in the Bid Package. No loans will be sold individually. 
The loans will be sold without Federal Housing Administration (FHA) 
insurance. Interested parties may bid competitively on the pool(s) of 
the defaulted Title I Loans. Bids may be made for one or all of the 
pools of defaulted Title I Loans, as well as for any combination of the 
pools. The Department will accept those bids that maximize the gross 
proceeds from the sale.
    This is not an offer to sell these loans. Offers will only be made 
individually to interested parties that certify that they or their 
advisors: (a) Are sophisticated purchasers; (b) have been given the 
opportunity to make their purchase decisions based upon review of 
information concerning the loans and such other due diligence as they 
deem necessary; (c) are not relying on representations or warranties, 
written or oral, from HUD; and (d) have the ability to evaluate the 
risks of the transactions and can bear the loss of the purchase price.

The Bid Process

    The Department will describe the procedure for participating in the 
Title I Defaulted Loan Sale in a Bid Package, which will include a 
nonnegotiable loan sale agreement prepared by the Department (Sale 
Agreement), specific bid instructions, as well as pertinent information 
such as total outstanding debt and applicable interest rate. Bid 
Packages will be mailed approximately 6 weeks prior to the Bid Date. 
The Bid Package will also include instructions for Bidder Registration 
and will contain procedures for obtaining supplemental information 
about the loans. Any interested party may request a copy of the Bid 
Package by following the instructions specified in the ADDRESSES 
section, above, of this notice.
    Prior to the Bid Date a Bid Package Supplement will be mailed to 
all Registered Bidders. It will contain the final list of loans to be 
conveyed to the successful bidder(s).
    Each bidder must include a deposit equal to 10% of the amount of 
its bid(s). If a successful bidder fails to abide by the terms of the 
Sale Agreement, including paying the Department any remaining sums due 
pursuant to the Sale Agreement and closing within the time period 
provided by the Sale Agreement, the Department shall retain and accept 
any deposit as liquidated damages.

Due Diligence Facilities

    A due diligence period will take place prior to the Bid Date. 
During the due diligence period, supplemental information including 
payment and collection histories will be available for review by 
registered bidders. Supplemental information will be available by mail 
in an electronic form or by examination of servicing files located at 
Due Diligence Facilities located in Albany, New York; Chicago, 
Illinois; and Seattle, Washington. The supplemental information at each 
Due Diligence Facility will not be duplicative of the information in 
the other Due Diligence Facilities. Registered bidders must go to the 
three Due Diligence Facilities to gain access to hard copy supplemental 
information covering the complete portfolio. Specific instructions for 
ordering supplemental information in an electronic format or making an 
appointment to utilize one of the Due Diligence Facilities will be 
included in the Bid Package. The Department reserves the right to 
charge a reasonable fee to cover its costs in duplicating and 
forwarding any information requested by an interested party.

Title I Defaulted Loan Sale Policy

    The Department reserves the right to add or delete loans to the 
Title I Defaulted Loan Sale at any time prior to the sale. The 
Department also reserves the right to reject any and all bids, without 
prejudice to the Department's right to include any defaulted Title I 
Loans in a later sale.
    Ineligible Bidders. The following individuals and entities (either 
alone or in combination with others) are ineligible to bid on any one 
or combination of the Title I Defaulted Loan pools included in the 
Title I Defaulted Loan Sale:
    (1) Any employee of the Department;
    (2) Any individual or entity that is debarred from doing business 
with the Department pursuant to 24 CFR Part 24;
    (3) 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 Title I Defaulted Loan Sale;
    (4) Any individual that was a principal and/or employee of any 
entity or individual described in paragraph (3) above at any time 
during which the entity or individual performed services 

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for, or on behalf of, the Department in connection with the Title I 
Defaulted Loan Sale; and
    (5) Any individual or entity that does not meet the qualifications 
as certified in the Bidder Qualification Statement.
    Number of Bids. A bidder may bid on as many pools as the bidder 
chooses.
    Timely Bids and Deposits. Each bidder assumes all risks of loss 
relating to 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 
for which there are tied bids 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 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 pool(s) of Title I defaulted loans subject to 
tied bids.
    Cashflow Status of Title I Defaulted Loans. Most of the loans 
included in the Title I Defaulted Loan Sale are nonperforming. However, 
some of the loans generate cash flow from borrower payments under the 
terms of modification agreements or repayment plans. The Department 
will provide details of the repayment terms and payment histories, as 
reflected in Departmental records. The completeness and accuracy of the 
records cannot be guaranteed but the Department will provide to the 
best of its ability the current information contained in its records. 
During the due diligence period the Department will continue aggressive 
collection activities and some loans which are nonperforming may pay 
off or begin to generate cash flow on or before the date that title is 
transferred to the successful bidder. Some loans which are generating 
cash flow may also pay off or become nonperforming. In the Final Bid 
Package the Department will include the most current status of each 
loan available. However, the Department makes no representations as to 
the status of loans on the date that title is transferred.
    Interest Rate Restrictions. Restrictions on the rates of interest 
that may be charged by the purchasers of the Title I loans will convey 
with the loans. When the Department accepted ownership of these loans, 
which generally carry high interest rates, it assessed interest at the 
lesser of the rate specified in the loan or the United States 
Treasury's current value of funds rate in effect on the date the Title 
I insurance claim was paid by the Department. See 24 CFR 201.62(a). 
Purchasers of defaulted Title I loans will be required to charge 
interest at no greater rate than that charged by the Department.
    These are the essential terms of sale. The Sales Agreement will 
provide additional details. To ensure a competitive bidding process, 
the terms of sale are not subject to negotiation.

Title I Defaulted Loan Sale Procedure

    The Department selected competitive sealed bids as the method to 
sell the pools of defaulted Title I loans. This method of sale 
optimizes the Department's return on the sale of these Title I loans, 
affords the greatest opportunity for all interested parties to bid on 
the defaulted Title I loans, and provides the quickest and most 
efficient vehicle for the Department to dispose of the pools of 
defaulted Title I loans.

Security Interests

    Manufactured home loans are unsecured. These loans were secured 
when made, but the collateral was repossessed by the lenders, and the 
debts owed to the Department on these loans represents the deficiency 
after deducting the greater of the assessed value or the sale price 
from the unpaid principal balance of the loans, and adding certain 
expenses incurred by the lenders.
    Property improvement loans may or may not be secured. The 
regulations require that any property improvement loan over a specified 
dollar amount must be secured by a deed of trust or a mortgage or, in 
Texas, a mechanic's or materialman's lien. This dollar amount has been, 
at various times, $2,500, $5,000, and $7,500.
    In addition, lenders could require security for loans below those 
amounts. Therefore, many of the property improvement loans may be 
accompanied by security instruments. The liens are usually second 
liens, but in some cases may be first liens, and in others may be in 
third or even lower position. Many of the liens represented by these 
security instruments may have been extinguished due to foreclosures of 
superior liens. The Department makes no representation as to the status 
or validity of any lien obtained as security for a Title I loan.

Scope of Notice

    This notice applies to the Title I Defaulted Loan Sale, and does 
not establish Departmental procedures for the sale of other loans, 
mortgage loans, or servicing interests. If there are any conflicts 
between the Notice and the Bid Package, the contents of the Bid Package 
prevail.

    Dated: September 8, 1995.
Jeanne K. Engel,
General Deputy Assistant Secretary for Housing-Federal Housing 
Commissioner.
[FR Doc. 95-23396 Filed 9-20-95; 8:45 am]
BILLING CODE 4210-27-P