Having auctioned good loans, bad loans, and real estate, Resolution Trust Corp. now plans to auction the rights to go after borrowers whose loans have already been charged off.
"You've heard of the good, the bad, and the ugly? This is the ugly," said Joel b. Segart, president of JBS & Associates, the auctioneer conducting the Dec. 10 sale in Atlanta. Although the loans were charged off, and the collateral foreclosed, many of the borrowers granted recourse to the lenders or signed personal guarantees.
Bidders will be able to review loan documents and credit reports, information that will help them decide whether it is worthwhile to pursue the claims.
The loans, which had a balance of about $800 million when they were charged off, will be packaged into 120 portfolios with an average size of $6 million.
Although such rights have been sold before, the auction "is the first time investor can do a reasonable amount of due diligence," Mr. Zegart said.
"There's going to be a rude awakening" for some borrowers, Mr. Zegart said.
The loans include consumer and commercial debt in addition to real estate.