Resolution Trust Corporation: Performing Assets Sold to Acquirers of
Minority Thrifts (Letter Report, 12/22/95, GAO/GGD-96-44).

Pursuant to a legislative requirement, GAO reviewed the Resolution Trust
Corporation's (RTC) efforts during fiscal year (FY) 1995 to sell
performing assets to acquirers of failed thrifts under the Minority
Preference Resolutions Program.

GAO found that: (1) RTC established a reasonable process for the
independent valuation of residential mortgage loans that were offered
for sale to minority acquirers; (2) RTC contracted out the initial phase
of the loan pricing process to be fair to minority acquirers while
maximizing the total return on asset disposition; (3) 11 of the 14
minorities who bought thrifts from RTC under the Minority Preference
Resolutions Program purchased 4,063 residential mortgage loans during FY
1995; and (4) the two valuation contractors priced mortgage loans using
a methodology that considered adjustments in interest rates, credit
risk, and was consistent with Freddie Mac's and Fannie Mae's pricing
methodology.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  GGD-96-44
     TITLE:  Resolution Trust Corporation: Performing Assets Sold to 
             Acquirers of Minority Thrifts
      DATE:  12/22/95
   SUBJECT:  Bank failures
             Mortgage loans
             Minority businesses
             Lending institutions
             Fair market value
             Assets
             Sales
             Price adjustments
             Interest rates
IDENTIFIER:  RTC Minority Preference Resolution Program
             RTC Securitization Program
             
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Cover
================================================================ COVER


Report to Congressional Committees

December 1995

RESOLUTION TRUST CORPORATION -
PERFORMING ASSETS SOLD TO
ACQUIRERS OF MINORITY THRIFTS

GAO/GGD-96-44

Resolution Trust Corporation

(247123)


Abbreviations
=============================================================== ABBREV

  AVR - Asset Valuation Review
  FDIC - Federal Deposit Insurance Corporation
  LTV - loan-to-value
  PMN - predominantly minority neighborhood
  RTC - Resolution Trust Corporation

Letter
=============================================================== LETTER


B-260116

December 22, 1995

The Honorable Alfonse M.  D'Amato
Chairman
The Honorable Paul S.  Sarbanes
Ranking Minority Member
Committee on Banking, Housing, and
 Urban Affairs
United States Senate

The Honorable James A.  Leach
Chairman
The Honorable Henry B.  Gonzalez
Ranking Minority Member
Committee on Banking and
  Financial Services
House of Representatives

As required by the Resolution Trust Corporation (RTC) Completion
Act,\1 we have reviewed RTC's efforts to sell performing assets to
acquirers of failed thrifts under the minority preference resolutions
program.  The act required us to annually assess RTC's determination
of fair market value of performing assets and determine the number
and type of assets sold under the program. 

During fiscal year 1994, there were no transfers of assets under the
minority preference resolutions program.  This report covers asset
transfers occurring in fiscal year 1995.  This will be our only
report on this subject since RTC has resolved all of the failed
thrifts it received and all thrifts taken over in the future will be
resolved by the Federal Deposit Insurance Corporation (FDIC).  FDIC
is not required by law to establish a similar asset transfer program. 


--------------------
\1 The Resolution Trust Corporation Completion Act, P.  L.  103-204,
107 Stat.  2369, 2378 (1993). 


   RESULTS IN BRIEF
------------------------------------------------------------ Letter :1

On the basis of our discussions with firms experienced in pricing
large volumes of mortgage loans and our review of mortgage loan
valuation literature, we found that RTC had established a reasonable
process anchored to agency\2 and mortgage securities markets
standards.  This process allowed for the independent valuation of 1-
to 4-family residential mortgage loans that were offered for sale to
minority acquirers.  RTC contracted with two independent valuation
contractors, experienced in mortgage securities markets, to provide
separate prices for each loan, which RTC then averaged and offered to
the minority acquirer as the final price.  By removing itself from
the initial phase of the loan pricing process, RTC demonstrated that
it was committed to establishing a process that was equitable and
fair to minority acquirers but that, at the same time, attempted to
maximize total return on the disposition of assets as required by
law.  Under this program, 11 of the 14 minorities who bought thrifts
from RTC purchased 4,063 1- to 4-family residential mortgage loans. 

Moreover, to price the loans, the two valuation contractors appeared
to have established a reasonable methodology that considered and
adjusted for movements in interest rates, credit risk sensitivity,
and the fact that these were RTC loans.  Further, officials at Fannie
Mae and Freddie Mac found the pricing methodology used by the
valuation contractors to be generally consistent with their
approaches. 

In commenting on a draft of this report, RTC's Vice President for
Asset Management and Sales stated that RTC agreed with our findings,
as well as with our description of its program to sell performing
assets to acquirers of minority thrifts. 


--------------------
\2 Agency refers to the Federal National Mortgage Association (Fannie
Mae), Federal Home Loan Mortgage Corporation (Freddie Mac), and
Government National Mortgage Association (Ginnie Mae). 


   BACKGROUND
------------------------------------------------------------ Letter :2

RTC was required by law to assist minorities to acquire failed
thrifts.  Specifically, the RTC Completion Act required RTC to give
preference to any offer from minority bidders for acquiring failed
thrifts located in predominantly minority neighborhoods (PMN) that
would result in the same cost to RTC as determined under section
13(c)(4) of the Federal Deposit Insurance Act, as amended by the
Federal Deposit Insurance Corporation Improvement Act of 1991.  This
section of the act requires RTC to choose the alternative for
resolving a failed thrift that results in the least cost to RTC. 
Additionally, a minority acquirer of a thrift in a PMN was to have
first priority in the deposition of performing assets of failed
thrifts. 

To satisfy these requirements, RTC established its minority
preference resolutions program in February 1994.  Under this
multifaceted program, RTC was to offer a failed minority-owned thrift
to investors of the same minority group before offering it to others. 
Additionally, bidding preferences were to be given to offers from
minority-owned financial institutions to acquire any failed thrift
whose home office was located in a PMN or that had 50 percent or more
of its offices in PMNs, provided that this preference would not
increase the cost to RTC.  Specifically, under the preference, if a
minority bidder was within 10 percent of the highest bid made by a
nonminority bidder, then a "best and final" round of bidding was to
take place between them. 

As part of this program, RTC was also to provide a winning minority
bidder with (1) interim capital assistance of up to two-thirds of the
required regulatory capital and (2) branch facilities, located in a
PMN and owned by RTC, on a rent-free basis for 5 years.  In July
1994, RTC issued procedures for selling 1- to 4-family residential
mortgage loans to acquirers of whole thrifts or branches under this
program.  In essence, after the sale of a thrift, RTC was to have 45
days to develop the preliminary pricing of the loans to be sold, and
the minority acquirer was to have up to 90 days to review the loans. 
When this review was completed, RTC was to give the acquirer the
final sales prices for the loans.  The acquirer was then to have 3
days to decide which loans to purchase and a fourth day to notify RTC
of its choice.  Minority acquirers could purchase loans of up to 100
percent of the net deposits assumed from RTC in the acquisition of
the failed thrift. 

The process RTC established to sell performing 1- to 4-family
residential mortgage loans to minority acquirers has undergone
several changes, in part because of concerns raised by a group of
seven minority acquirers.  This group believed (1) that RTC should
not be responsible for pricing the loans, (2) that RTC's current
methodology resulted in the loans being overpriced, and (3) that the
resale provision was unfair.  In March 1994, RTC stated that it would
have its own staff price the loans.  However, to ensure that the
pricing was done in an equitable manner, in June 1994 RTC hired two
asset valuation contractors to independently price the mortgage
loans, thus removing itself from the pricing process.  To ensure
objectivity, RTC awarded fixed-fee contracts whereby neither the
sales price established for the loans nor the price paid by the
purchaser was a factor in determining the fee paid to the asset
valuation contractors. 

Additionally, RTC's March 1994 pricing procedures and mortgage loan
sales agreement stated that RTC would be entitled to receive 50
percent of the acquirer's profit if the acquirer sold any of the
mortgage loans prior to 181 days after the closing of the sales
agreement.  However, by June 1994, RTC had decided to eliminate this
resale provision based on concerns raised by the minority group. 

Finally, under the provisions of the mortgage loan sale agreement,
RTC was expected to credit, to the minority acquirers who exercised
their option to purchase the mortgage loans, the interest accrued on
the loans selected.  The period of accrual was to begin 45 days after
the signing of the agreement and end on the day preceding the closing
date of the transaction.  The accrued interest is defined in RTC's
minority loan pricing procedures as the coupon interest rate on the
loans less the average federal funds' rate during the accrual
period.\3 However, to resolve a contract dispute regarding the final
pricing of the mortgage loans, RTC provided the minority acquirers
who decided not to purchase the mortgage loans with the following
option--the acquirer could choose not to exercise the agreement on
the loan portfolio, but rather receive the interest accrued on the
respective portfolio.  Under this option, the acquirer waived the
right to purchase any 1- to 4-family residential mortgage loans
through the minority resolutions preference program. 


--------------------
\3 The federal funds' rate is the interest rate charged by banks to
other banks in need of overnight loans. 


   OBJECTIVES, SCOPE, AND
   METHODOLOGY
------------------------------------------------------------ Letter :3

The RTC Completion Act required that we submit an annual report to
Congress on transfers of performing assets by RTC to any acquirer. 
In discussions with the oversight committees, it was agreed that our
report would focus on assets sold to minority acquirers. 
Specifically, the objectives of our review were to (1) assess how RTC
determined the fair market value for the loans transferred and (2)
ascertain the number and description of performing loans transferred
to minority thrifts. 

Although the act required us to assess RTC's determination of fair
market value for the loans transferred, we were unable to evaluate
RTC's determination for the following reasons.  First, fair market
value is commonly measured through competitive sales.  Second, loans
not purchased by minority acquirers were sold in bulk, and sales
prices were not assigned to individual loans.  Third, there were no
data available to compare the prices of the mortgage loans sold to
minority acquirers with the prices of other loans sold by RTC,
because fewer whole loans were available for sale once RTC's
securitization program started showing results around June 1991.\4
Therefore, we focused on assessing the reasonableness of the process
RTC established to price the mortgage loans, including the
methodology used by RTC's valuation contractors.  To assess
reasonableness, we discussed the methodology and models used to price
the 1- to 4-family residential mortgage loans with RTC officials and
the two valuation contractors.  While both valuation contractors were
cooperative in discussing the methodology in general, they were
reluctant to discuss their pricing models in detail.  The valuation
contractors considered the specifics of these models to be
proprietary because each firm has individually and confidentially
developed its own model.  This did not affect our determination of
the reasonableness of the these models because we were able to
determine what factors were considered in the models. 

We also interviewed two of RTC's three due diligence contractors to
understand their role and responsibilities.\5

Further, we reviewed RTC's policies and procedures and the valuation
contractors' operating guidelines.  To obtain additional perspectives
on RTC's process, we interviewed officials of Freddie Mac and Fannie
Mae who were involved in valuing asset portfolios similar in type to
RTC's assets.  To better understand how mortgage loans are valued, we
also reviewed academic literature on mortgage loan valuation. 

Finally, we were contacted by seven minority acquirers and their
advisers after they met with RTC and learned of our review.  We
subsequently met with them to understand their experiences in
purchasing loans from RTC under the minority preference resolutions
program.  As a follow-up to that meeting, we also interviewed their
valuation contractor to obtain information on the methodology used to
assess the price of the loans. 

To accomplish our second objective, which was to determine the number
and type of loans sold to minority acquirers, we obtained and
analyzed, but did not independently verify, RTC transaction reports
showing asset sales through the minority preference resolutions
program.  These reports identify the type and number of loans sold,
as well as their quality, price, and purchaser.  In addition, we also
interviewed RTC officials regarding the reliability of the reports. 

We requested comments on a draft of this report from the Deputy and
Acting Chief Executive Officer of RTC or his designee.  On November
28, 1995, RTC's Vice President for Asset Management and Sales
provided a written response in which he concurred with our findings. 
These comments are reprinted in appendix I. 

We did our work between August 1994 and October 1995 in accordance
with generally accepted government auditing standards. 


--------------------
\4 Securitization is the process of assembling similar assets into
pools that are used to collateralize newly-issued securities, which
are referred to as mortgage-backed securities. 

\5 Due diligence is the process of evaluating information on the
assets to fully assess their value. 


   RTC ESTABLISHED A REASONABLE
   PROCESS FOR PRICING MORTGAGE
   LOANS
------------------------------------------------------------ Letter :4

The pricing of mortgage loans is a difficult and complex process
requiring the use of a sophisticated and technical methodology.  RTC
established a reasonable process to price mortgage loans that was
anchored to agency and mortgage securities markets standards.  This
process provided for an independent valuation of 1- to 4-family
residential mortgage loans that were offered for sale to minority
acquirers of failed thrifts located in PMNs.  It is first important
to note that RTC did not price the loans itself; instead, in June
1994 it hired two independent valuation contractors experienced in
mortgage securities markets to determine the price of each mortgage
loan.  Each valuation contractor was required to price the mortgage
loans on an individual basis, rather than at a portfolio level,
because the acquirers were allowed to purchase some, all, or none of
the loans under the minority preference resolutions program. 

RTC also hired three due diligence contractors to preliminarily
review each loan to determine whether it was eligible for sale under
the minority preference resolutions program.  To be eligible for sale
under the program, the loan had to be a performing 1- to 4-family
residential mortgage type.  The purpose of RTC's due diligence loan
file review was to secure essential information that could be used to
evaluate the loans for sale.  Some of the essential documents
included the loan note, mortgage insurance certificate, title,
appraisal, and credit and verification forms.  The due diligence
contractors were not required to make judgments about credit
decisions or the loan's salability.  According to RTC's valuation
contractors, the pricing of the mortgage loans began upon receipt of
the loan data files from RTC's due diligence contractors.  The
valuation contractors were to review these data files for
completeness and accuracy and to notify RTC of any errors or missing
documents in the loan file. 

RTC told us that it generally resolved these deficiencies by
requiring the due diligence contractors to update the loan file.  The
valuation contractors said that the loans were then stratified to
determine whether individual loans conformed to secondary market
standards.\6 Using RTC's stratification criteria, the two valuation
contractors were to group the loans into three levels, referred to as
"strats." According to RTC, its stratification criteria were based on
agency and secondary market standards and reflected the minority
preference resolutions program guidelines.  See table 1 for RTC's
criteria for the strat categories. 



                                Table 1
                
                          RTC's Strat Criteria

Strat category          Criteria
----------------------  ----------------------------------------------
Strat one               Currently performing with no more than one 30-
                        day delinquency in the last 12 months

                        Immaterial document deficiency

Strat two               Currently may be 30-days delinquent or may
                        have two 30-day late payments in the last 12
                        months

                        Immaterial document deficiency

Strat three             Currently may have one 60-day or three 30-day
                        late payments in the last 12 months

                        Significant document deficiency
----------------------------------------------------------------------
Note:  Strat four loans are more than 60 days past due and are
generally not offered under the program. 

Source:  RTC Division of Asset Management and Sales. 

Under stratification, the two valuation contractors assigned strat
codes based on the loan data provided by the due diligence
contractors.  The valuation contractors' pricing reports showed that
they assigned the same strat for the majority of the loans.  The two
valuation contractors said that, in cases where there were missing
loan data, the loans were considered to be of lower quality and were
therefore assigned to a higher strat category. 

After loan stratification, both valuation contractors used standard
mortgage-backed security methodologies to price each RTC mortgage
loan.  This was done to determine the mortgage loan's market value as
objectively as possible.  The initial step under this approach was to
assign each loan a benchmark price, which approximated the market
value of a mortgage loan at a given point in time.  For example,
Freddie Mac's 1-year adjustable rate mortgage price was generally
used as the benchmark for adjustable rate mortgages.  According to
one valuation contractor, selecting an appropriate benchmark price is
a critical step in this methodology. 

According to the valuation contractors, the agency benchmark price
assigned to each mortgage loan was first determined by matching a
loan's characteristics to the most closely similar agency
mortgage-backed security.\7 Second, after the loan servicing fee was
subtracted from the current rate on RTC's mortgage loan,\8 the loan's
interest rate and the agency's interest rate were matched.  For
example, a RTC fixed rate mortgage loan with an 8-percent interest
rate net of loan servicing would be matched with an agency
mortgage-backed security with an 8-percent fixed rate.  Next, an
equivalent benchmark price from the mortgage-backed security price
database was selected.  The two valuation contractors stated that,
when determining the preliminary and final prices, they were required
by RTC to use secondary market data from the close of business of the
Wednesday prior to their receiving the loan data files.  This pricing
data, obtained from Knight-Ridder, was a composite of prices from
seven different sources,\9 updated daily.  Thus, the pricing
reflected the actual market value of the mortgage loans purchased at
that time.  According to one valuation contractor, consistently using
one date in time minimized subjectivity. 

Once the agency benchmark price was determined, adjustments for
movement in interest rates and credit risk sensitivity were made.  To
determine the adjustments for interest rate risk, both valuation
contractors said they used an analytical technique known as
option-adjusted spread model.  This model priced a mortgage loan or
mortgage-backed security by simulating many different future patterns
of interest rates.  The model then used these simulations and the
specific characteristics of the mortgage loan to predict prepayments,
which determined the cash flow of the mortgage.  Finally, the model
matched the predicted cash flow to the current mortgage prices, to
determine the price for the mortgage in question. 

In addition to the adjustments made for interest rate risks,
assessments for credit risk were done to estimate the probability of
default.  To determine the discounts for credit risk, both
contractors analyzed each loan and assigned it a risk weight based on
characteristics that affect risk.  These risk characteristics include
loan-to-value (LTV) ratio, geographic location, mortgage insurance,
and delinquency status.\10 Both valuation contractors agreed that an
important variable in determining the severity of risk was the
current LTV ratio, because it provided a reliable valuation of the
collateral.  In general, the higher the LTV the greater the risk. 
After the risk weights were assigned, they were multiplied together
to obtain the total credit risk.  The contractors acknowledged that
this part of the process was slightly subjective, but they agreed
that this was an accepted technique in the secondary market. 

The final adjustments were for the strat category, unusual loan types
(such as balloon mortgages where the balance of the loan was due in
one lump sum on a specified date), and the fact that these were RTC
loans from a failed thrift.  The two valuation contractors also said
that determining these adjustments was a subjective matter, but both
believed that correct assessments of these discounts depended heavily
on previous experience in valuing and marketing RTC
assets--experience which both contractors possessed. 

Each valuation contractor provided RTC with each loan's final price
and strat category.  After receiving the two reports, RTC averaged
the two loan prices.  The averaged price was offered to the minority
acquirers as the final price.  RTC's data showed that, although the
two contractors worked independently to price the 4,063 mortgage
loans, there were fewer than 100 cases in which they differed on the
final price of the mortgage loan.  The difference in price was
usually less than half a percent.  However, in cases where they
differed significantly, RTC required both valuation contractors to
reprice the loans. 

We discussed the mortgage-backed securities approach used by RTC's
contractors with officials from Fannie Mae and Freddie Mac, who said
that the methodology appeared to be reasonable.  Specifically, the
officials said that the methodology was similar to the approach they
used to value mortgage loans and contained the elements necessary to
value mortgage loans.  For example, although officials at Fannie Mae
and Freddie Mac would not discuss the specifics of their models
because they are considered proprietary, they explained that
measuring interest rate movement and credit risk sensitivity are very
important steps in valuing mortgage loans. 


--------------------
\6 The secondary mortgage market standards as recognized by Fannie
Mae, Freddie Mac, and other investment firms include the rules for
buying and selling mortgages that have already been originated or
issued. 

\7 Loan characteristics include such factors as collateral type,
geographic location, and interest rate. 

\8 Loan servicing was initially removed so that the model would be on
a par with the agency benchmark, since Fannie Mae and Freddie Mac
were not involved in loan servicing.  However, after the benchmark
was determined, loan servicing was added back to RTC's mortgage loan
benchmark. 

\9 These seven sources included Fannie Mae, Freddie Mac, and Ginnie
Mae mortgage securities. 

\10 Loan-to-value ratio refers to the amount borrowed compared to the
cost or value of the property purchased. 


   ALTERNATIVE PRICING METHODOLOGY
   PROPOSED BY SOME MINORITY
   ACQUIRERS
------------------------------------------------------------ Letter :5

Seven minority acquirers and RTC were unable to agree on the mortgage
loan prices.  These acquirers believed that the mortgage loans were
overpriced.  They also believed that RTC's pricing methodology did
not establish the fair market value of the mortgage loans.  They
therefore discussed with RTC the possibility of using an alternative
methodology to price the loans.  RTC decided not to use the
alternative methodology proposed by the minority acquirers because it
believed that the methodology being used established a fair market
value for the loans and that none of the mortgage loans were
overpriced. 

The alternative methodology proposed by the minority acquirers was
similar to the asset valuation reviews (AVR) used by RTC in 1992. 
Under the AVR process, RTC hired independent contractors to review
samples of assets to estimate the potential loss for each asset
category held by failed thrifts.  AVR computes the present value of
such assets using a discount rate based on secondary markets and
adjusted for risk-related factors such as loan documentation.  The
estimated recovery values were not determined for individual loans in
a portfolio, but rather for the category as a whole. 

In their efforts to demonstrate that the mortgage loans were
overpriced, the seven minority acquirers contracted with a firm to
complete an analysis of the mortgage loans RTC made available for
sale under the minority preference resolutions program.  While the
approach of the minority acquirers' contractor was somewhat similar
to that used by RTC's contractors, there were also fundamental
differences.  For example, RTC's contractors stratified and assigned
benchmarks to each loan, while the minority acquirers' contractor
stated that benchmarks were not determined for individual loans, but
rather for the portfolio as a whole.  Additionally, RTC's contractors
and the minority acquirers' contractor also differed on the
coefficients, which are risk weight factors used in calculating the
loan price. 

As previously stated, the approach of the minority acquirers'
contractor was similar to RTC's AVR process.  In summary, to
determine the mortgage loan price, the minority acquirers' contractor
said it used a discounted cash flow methodology based on the assets'
expected income and yields on mortgage trading in the secondary
market.  The price was then adjusted for risk-related factors, such
as the probability of default, loan quality, and document
deficiencies.  To determine the adjustments for movement in interest
rates, prepayment speeds were estimated using the Wall Street
consensus speeds for like mortgage loan rates.  Cash flows for each
loan type were calculated using loan characteristics and prepayment
speeds.  These cash flows were discounted to determine the market
value of the loans.  Finally, the minority acquirers' contractor
believed that a yield premium, to account for the fact that the loans
were being provided in conjunction with an acquisition of marginal
quality deposit liabilities, was also appropriate. 

The seven minority acquirers and their contractor contended that the
AVR approach was an acceptable methodology to price the assets
because RTC had used it in the past.  However, an RTC official stated
that their process for pricing mortgage loans had evolved over the
years and that they no longer used the AVR approach.  RTC believed
that the current mortgage-backed security approach resulted in a
better determination of fair market value and attempted to maximize
total return on the disposition of a failed thrift's assets, as
required by law. 


   LOANS SOLD TO MINORITY
   ACQUIRERS
------------------------------------------------------------ Letter :6

RTC set aside about $3 billion in residential mortgage loans for
possible sale to minority acquirers through its minority preference
resolutions program.  Between January 1994 and September 1995, RTC
offered 16 pools of performing 1- to 4-family residential mortgage
loans to the 14 minority acquirers who purchased failed thrifts
located in PMNs.  As of October 11, 1995, 11 minority acquirers had
purchased 4,063 mortgage loans for $289.6 million.  Table 2 provides
detailed information on their 13 transactions. 



                                Table 2
                
                  RTC Mortgage Loan Sales to Minority
                               Acquirers

                                                    Purchase  Purchase
                                                       price     price
                                 Date of    Number  (percent  (million
Transaction                         sale  of loans         )        s)
------------------------------  --------  --------  --------  --------
One                               10-31-       446    94.61%     $30.6
                                      94
Two                               10-31-       475     94.52      34.6
                                      94
Three                             11-08-       161     95.83      11.0
                                      94
Four                              12-07-         9     98.97       0.9
                                      94
Five                              12-20-     1,132     82.68      45.1
                                      94
Six                               01-18-       126     96.82      11.1
                                      95
Seven                             01-31-       140     96.49      21.5
                                      95
Eight                             02-17-       237     96.99      17.3
                                      95
Nine                              02-21-       726     94.12      45.4
                                      95
Ten                               02-28-       197     95.13      30.2
                                      95
Eleven                            05-31-       354     96.87      32.3
                                      95
Twelve                            08-30-        33     96.74       5.6
                                      95
Thirteen                          09-28-        27     97.44       4.0
                                      95
======================================================================
Total                                        4,063              $289.6
----------------------------------------------------------------------
Note:  Two minority acquirers exercised two loan sales transactions
each. 

Source:  RTC Division of Asset Management and Sales. 

Additionally, our analysis of the final loan prices showed that, of
the 4,063 mortgage loans, 64 percent, or 2,606, were sold for between
91 and 100 percent of the book value, as shown in figure 1. 

   Figure 1:  Final Mortgage Loan
   Pricing Distribution

   (See figure in printed
   edition.)

Note:  The total number of loans sold was 4,063. 

Source:  RTC Division of Asset Management and Sales. 

Finally, as of October 11, 1995, RTC had paid $4 million in accrued
interest to the 11 minority acquirers who purchased mortgage loans
and $1.4 million in accrued interest to 3 minority acquirers who
decided not to exercise their option to purchase mortgage loans.  RTC
officials believe that paying the $1.4 million in accrued interest
was the best alternative to resolving a contract dispute with the
minority acquirers over the final pricing of the mortgage loans.  We
did not determine whether this practice was the best alternative to
resolving the contract dispute because it was outside the scope of
our assignment. 


---------------------------------------------------------- Letter :6.1

We are sending copies of this report to other interested
congressional committees and subcommittees, RTC's Deputy and Acting
Chief Executive Officer, and the Chairman of the Thrift Depositor
Protection Oversight Board.  Copies will be made available to others
upon request. 

This report was prepared under the direction of Ronald L.  King,
Assistant Director, Government Business Operations Issues.  Other
major contributors to this report are listed in appendix II.  If you
have any questions, please contact me on (202) 736-0479. 

Gaston L.  Gianni, Jr.
Associate Director, Government
 Business Operations Issues




(See figure in printed edition.)Appendix I
COMMENTS FROM THE RESOLUTION TRUST
CORPORATION
============================================================== Letter 


MAJOR CONTRIBUTORS TO THIS REPORT
========================================================== Appendix II

GENERAL GOVERNMENT DIVISION,
WASHINGTON, D.C. 

Tammy R.  Conquest, Senior Evaluator, Government Business Operations
 Issues
Michael M.  Yacura, Evaluator

OFFICE OF THE CHIEF ECONOMIST,
WASHINGTON, D.C. 

William McNaught, Economist


*** End of document. ***