Bulletin: NL000014

Dear Associates:

1. Consent to Foreclosure.

Both the Federal Deposit Insurance Corporation (FDIC) and Resolution Trust Corporation (RTC) have now issued Statements of Policy on foreclosure. RTC and FDIC previously asserted a right to consent to the foreclosure of a prior lien under 12 U.S.C. §1825(b)(2). RTC and FDIC asserted this right where they owned the land or where they held an inferior lien. They asserted that a foreclosure without consent did not extinguish their lien. The new RTC and FDIC policies are very similar to each other, but differ from their prior positions.

a. RTC and FDIC Consent.

The new RTC Interim Statement of Policy dated May 7, 1992, and FDIC Statement of Policy dated July 7, 1992:

Failed Institution Mortgages - RTC and FDIC consent to all previous and future foreclosures of superior mortgages where RTC or FDIC, in corporate capacity or receivership capacity, holds an inferior mortgage of a failed depository institution. You do not need to require consent by RTC or FDIC to a mortgage foreclosure where it is the owner of a mortgage of a failed institution.

Ownership -

RTC Ownership: If the RTC owns the land, then it requires notice of the foreclosure of all superior mortgages to be delivered at least 30 days before the foreclosure. A notice must state the time, date, place and manner of sale and name of failed institution. Notice must be sent by certified mail or overnight courier service. The address for notice is Resolution Trust Corporation, Foreclosure Consent Notice Clearance Center, 3500 Maple Avenue, Lock Box Number 42, Dallas, Texas 75219. RTC has 60 days after the notice to respond. If RTC does not respond, it is deemed to consent. RTC has granted consent if the land is a single-family residence and the prior mortgage is a FHA, FMHA, HUD owned or VA loan. Please call our underwriting personnel if the mortgage (other than a FHA, FMHA, HUD owned, or VA single-family loan) will foreclose title held by RTC.

FDIC Ownership: If FDIC owns the land, it automatically consents to all previous and future foreclosures of superior mortgages where FDIC, in its corporate capacity or receivership capacity, owns title. You do not need to require consent by FDIC to a mortgage foreclosure where it owns the title.

Financing -

RTC: If RTC sells land and retains subordinate purchase money financing, it must consent to a foreclosure of a superior lien unless its Deed contains an express consent to foreclose. If a mortgage is given to RTC where RTC sells the property, you must require RTC consent to foreclose a superior lien.

FDIC: FDIC consents to foreclosures of superior mortgages where FDIC retains subordinate purchase money financing. You do not need to require consent by FDIC to a mortgage foreclosure where it retains purchase money financing.

Prior Statutory (Involuntary) Lien Foreclosure - RTC and FDIC require that they consent to a foreclosure of a prior statutory (involuntary) lien if they hold title or an inferior lien (e.g., where they take over a failed savings and loan). If a superior mechanics' lien, judgment lien, tax lien or other involuntary lien is foreclosed, you must require RTC or FDIC consent to the foreclosure. Otherwise, the foreclosure does not extinguish the RTC or FDIC lien or title.

RTC or FDIC Conservator or Subsidiary - RTC and FDIC will not assert right to consent if the interest is held by RTC or FDIC as conservator or by a subsidiary of a lender in RTC or FDIC receivership or conservatorship.

Judgment Liens Held by RTC or FDIC - RTC and FDIC policies do not grant consent to foreclosure of superior mortgages where FDIC or RTC, in corporate capacity or receivership capacity, holds a judgment lien in favor of a failed depository institution. RTC plans to publish a revised policy consenting to foreclosure of superior mortgages that will extinguish the inferior judgment lien. FDIC does not plan to publish a revised policy. You do not need to require consent by RTC to a superior mortgage foreclosure where it is the owner of a judgment lien of a failed institution. You do need to require consent by FDIC to a superior mortgage foreclosure where it is the owner of a judgment lien of a failed institution.

State Law - If state law requires notice to RTC or FDIC as holder of a lien, require compliance with state law.

Retroactive - These policies are retroactive.

Form of Consent - Please see Consent to Foreclosure forms available through the reference section at the end of this bulletin.

Effect of Consent.

Consent to foreclosure does not waive redemption rights that state or federal law recognizes.

2. Redemption.

The RTC and FDIC will not assert a right of redemption in their conservatorship, receivership, or corporate capacity. You do not need to except to right of redemption by the RTC or FDIC except to the extent that state law provides for right of redemption.

3. List of Failed Depository Institutions.

A list of institutions subjected to control by the RTC or FDIC is available upon request.

4. FDIC Sales of Lower Income Housing.

Under the FDIC Improvement Act of 1991, some lower income housing sold by the FDIC is subject to restrictions on use. The restrictions require availability of the property for lower income family use. If these restrictions appear in the Deed or in a separate recorded instrument, you must except to them. FIRREA (effective August 9, 1989), as amended, includes these requirements on certain sales by RTC.

5. Recapture of Profits.

The FDIC Improvement Act of 1991 and the RTC Refinancing, Restructuring and Improvement Act of 1991 require recapture of profits on resales of some eligible single-family properties. These requirements apply if the property is sold within one (1) year after the acquisition from the FDIC or RTC. These requirements do not apply unless the Deed requires payment of 75% of the profits from the resale. If a resale does not occur within one (1) year, then the provision automatically terminates. If the Deed contains this restriction and a sale occurs within one (1) year after the Deed, you should require a release from the FDIC or RTC.

6. RTC Special Warranty Deeds.

The RTC has agreed to issue Special Warranty Deeds where it sells property. You should always require a Special Warranty Deed from the RTC.

7. Statutory (Involuntary) Liens Against Failed Lending Institutions.

RTC and FDIC assert that statutory (involuntary) liens such as judgment liens against failed institutions do not attach to the institution's property if recorded after RTC or FDIC becomes receiver. They rely on 12 U.S.C. §1825(b)(2). We do not rely on this provision. Require a release of all statutory (involuntary) liens recorded before a deed from RTC or FDIC to a new institution or a third-party purchaser is recorded. Require a release of all later filed mechanics' liens.