Resolution Trust Corporation: Assessing Portfolio Sales Using Participating Cash Flow Mortgages

A postclosing assessment of the Congregate Care cash flow mortgage was completed shortly after the buyer satisfied its obligation to RTC. RTC has not completed postclosing assessments of Centrust and Patriot because RTC officials determined that these transactions cannot be accurately assessed until they are completed. RTC does not have an estimate for when this will occur.

On May 26, 1992, RTC advised GAO that it was in the process of establishing servicing and oversight policies and procedures including: (1) utilizing existing RTC loan servicers to service the pilot transactions on an interim basis; (2) establishing a loan servicing program for the long-term administration of the portfolio sales; and (3) developing a loan servicer oversight program. RTC has completed the development of its detailed oversight procedures for loan monitoring and administration. On November 10, 1992, RTC established its Multi-Asset Sales Transaction (MAST) National Servicer Task Order Procedures and implemented MAST as its new oversight process. Oversight of MAST is the responsibility of regional RTC offices. GAO has reviewed the new procedures and will comment on them in a follow-up report that will be issued in the near future.

RTC has determined how it will account for the loan assets that it receives as a result of the pilot transaction. Each retained loan asset will be accounted for as an adjustment to the asset-in-liquidation accounts. In May 1992, RTC told GAO that every potential and contingent liability would be considered in the loan loss reserve calculations and will be reflected in RTC corporate reporting. An allowance for losses is estimated for the retained loan asset through the allowance for losses computation done by RTC corporate accounting.