Resolution Trust Corporation:

Unnecessary Loan Servicing Costs Due to Inadequate Contract Oversight

GGD-91-19: Published: Jan 17, 1991. Publicly Released: Jan 17, 1991.

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Pursuant to a congressional request, GAO reviewed the Resolution Trust Corporation's (RTC) use of interim servicing agreements (ISA) to determine ISA loan servicing costs and the adequacy of RTC monitoring of such agreements.

GAO found that: (1) RTC could have avoided as much as $1 million in loan processing costs by closing one large loan processing center; (2) unnecessary costs resulted from inadequate contract monitoring, insufficient RTC and contractor oversight, insufficient cost information, and RTC failure to take early action to market the center; (3) RTC did not have enough staff to adequately oversee center operations to ensure that costs incurred were reasonable; and (4) RTC did not begin marketing the center until 6 months after 85 percent of the center's loans had been removed.

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