Resolution Trust Corporation: 1992 Washington/Baltimore Auctions Planned and Managed Poorly
GGD-93-115
Published: Jul 07, 1993. Publicly Released: Jul 07, 1993.
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Highlights
GAO reviewed the Resolution Trust Corporation's (RTC) Washington/Baltimore area real estate auctions, focusing on the: (1) effectiveness of RTC auction planning and execution; and (2) net recoveries resulting from these auctions.
Recommendations
Recommendations for Executive Action
| Agency Affected | Recommendation | Status |
|---|---|---|
| Resolution Trust Corporation | The President and Chief Executive Officer, RTC, should develop methods to monitor future auctions to ensure that similar problems do not occur and that book value reduction goals do not cause staff to disregard established policies and procedures, which are designed to maximize recoveries. At a minimum, RTC staff must ensure that: (1) marketing time is adequate; (2) asset information is accurate and complete; and (3) assets are prepared and title issues resolved before the auction. |
Closed – Implemented
RTC drafted explicit policies regarding the preparation and marketing of assets at auctions. On August 31, RTC Circular 10300.34, "Preparing Real Estate Owned for Sale at Auction," was issued. This guidance is intended to ensure that properties are properly prepared for sale and that information provided to interested parties is accurate and complete. The directive assigns specific responsibilities for implementing the directive and oversight. RTC is drafting a new directive, "Brochure Standards for Auctions and Sealed Bid Initiatives of RTC REO," to standardize the presentation and content of marketing brochures. RTC advised GAO that, in the future, the National Sales Center would be taking a more active role in providing oversight of REO auctions conducted by field offices. Regularly scheduled visits to each field office will be made by National Sales Center Auction Department staff to monitor auction practices and provide direction.
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| Resolution Trust Corporation | The President and Chief Executive Officer, RTC, should provide all the information required by the RTC Refinancing, Restructuring, and Improvement Act of 1991 by revising RTC reports to Congress on auction results. The reports should reflect net recoveries by deducting cash discounts and all costs related to the sales, including commissions, marketing costs, closing costs, and legal fees and should accurately reflect the total book value of the assets offered. Also, to provide a complete description of auction sales during each quarter, reports should update sales data related to previously reported auctions. |
Closed – Implemented
RTC is revising its reporting procedures and will include information on the expenses of sales in reports to Congress. As of September 1994, RTC's quarterly reports on auctions were more accurate than in July 1993. Field offices are now asked to provide the most current data they have, not the auction event results. Therefore, cash discounts can be included in the report if the asset sale has closed and some of the expenses can also be included. The reports still lack expense information for any assets using RTC seller financing and on legal fees which are billed through the RTC legal department. In addition, certain SAMDA fees are not reported in the reports. RTC auction officials told GAO that they do not have the staff resources or the system capability to update the quarterly reports and incorporate prior auction sales data to provide the most complete data possible on each auction. GAO does not believe it is likely that RTC will be able to take further steps to improve quality.
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