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Loan Asset Sales: OMB Policies Will Result in Program Objectives Not Being Fully Achieved

AFMD-86-78 Published: Sep 25, 1986. Publicly Released: Sep 25, 1986.
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Highlights

In response to a congressional request, GAO provided information on the Office of Management and Budget's (OMB) objectives and guidelines for agencies to follow in selling loan assets.

Recommendations

Recommendations for Executive Action

Agency Affected Recommendation Status
Office of Management and Budget To fully maximize loan sale net proceeds and fulfill the objectives of its loan asset sale program, the Director, OMB, should revise OMB guidelines for sale of loan assets to permit agencies to sell loan assets on a structured basis, which would include some form of future recourse to the government, or other credit enhancement, and permit servicing of sold loans by an entity other than the purchaser.
Closed – Implemented
OMB revised its loan asset sale and prepayment guidelines in OMB Circular A-129 to permit agencies to sell loans in a manner that results in the maximum net proceeds to the government. The revised guidelines will allow credit enhancements such as overcollateralization. The circular was revised on November 25, 1988.
Office of Management and Budget To fully maximize loan sale net proceeds and to fulfill the objectives of its loan asset sale program, the Director, OMB, should classify, for budget purposes, the government's maximum contingent liability under limited-recourse loan sales as borrowings and the unencumbered sale proceeds as receipts.
Closed – Not Implemented
This recommendation is being closed because it has been open over 2 years, and OMB has repeatedly stated that it will not change its position on this matter.
Office of Management and Budget The Director, OMB, should not implement the OMB-proposed policy for determining subsidies under the pilot loan assets sale program, but should revise the policy by considering the two methodologies discussed in this report. In addition, the Director should report to Congress on the method selected and include an appropriate justification for the selection.
Closed – Implemented
In the Administration's Credit Reform Proposal for the 1989 budget, OMB has dropped loan sales as a requirement for measuring subsidies. Loan sales are considered one way of capturing subsidies, but are no longer mandatory. Justification for this decision will be included in the budget documents for the 1990 budget.

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Topics

AssetsBudget administrationCost effectiveness analysisCredit salesDebt collectionFederal agenciesFederal debtFinancial managementLoansProjections