WASHINGTON -- The Resolution Trust Corp. has declared its first sale of nonperforming housing loans backed by tax-exempt bonds to be successful and is moving ahead with a second auction, scheduled for yearend.
But some bond issuers and investment bankers say they continue to be concerned that the RTC is moving too fast. As a result, they say, the agency is failing to do all it could to preserve the bond financing and make sure the projects continue as housing for low-income people.
Seven Bidders Successful
"They need to be more responsive to the needs of the market," said a housing developer who asked not to be named. "I don't want to see this killed; I just want to see it improved."
The RTC official managing the sales, William Schainker, said he was "extremely pleased" with the first auction, of $125 million in loans, concluded at the end of October. Seven successful bidders bought a total of 15 loan pools, said Mr. Schainker, who is the RTC's senior asset marketing specialist. He declined to name the buyers.
Mr. Schainker noted a large, diverse group of bidders, and "the return to the RTC was better than expected," he said. The agency anticipates "that because of our success there will be more interest" from bidders in future auctions, he added.
The RTC has already begun gearing up for its second loan sale, of $500 million in loans, Mr. Schainker said. No bidding deadline has been set, but he said he expects the auction around yearend. First Boston Corp. is managing the second auction, as it did the first, Mr. Schainker added.
Overall, the RTC plans to sell about $1.8 billion in nonperforming multifamily housing loans originated by failed savings and loans that have been acquired by the agency.
RTC as Credit Enhancer
Issued mainly by local authorities, the bonds banking the loans carry investment-grade ratings because they received a letter of credit or some other form of credit enhancement from the S&Ls. When the RTC acquired the failed institutions, it became the bonds' credit enhancer and has been paying debt service to bondholders.
The housing industry first raised a concern about the sales when the RTC said it wanted to end its credit-enhancer role.