Bulletin: NL000028

Dear Associates:

Bankruptcy Sale Free of Liens Held by FDIC or RTC.

There is doubt whether a bankruptcy sale free and clear of a lien held by the RTC or FDIC in corporate or receivership capacity will be effective without consent of the RTC or FDIC.
Company Policy:

If a bankruptcy court order sells free and clear of a lien held by RTC or FDIC in corporate or receiver capacity, require a recordable release of the lien.

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). The current RTC and FDIC policies differ from their prior positions.

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 superior mortgage foreclosure if RTC or FDIC 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. 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 if FDIC 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 if FDIC retains subordinate purchase money financing. You do not need to require consent by FDIC to a superior mortgage foreclosure if FDIC 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 expressly grant consent to foreclosure of superior mortgages if FDIC or RTC, in corporate capacity or receivership capacity, holds a judgment lien in favor of a failed depository institution. You do not need to require consent by RTC or FDIC to a superior mortgage foreclosure if RTC or FDIC 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.

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

RTC Special Warranty Deeds.

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

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.

List of Failed Institutions

A list of each bank and savings institution that has been controlled by the FDIC or RTC is available through the National Legal Department in Houston. If an inferior lien is held by this institution, you should assume that the FDIC or RTC owns that lien as of the noted date unless you confirm otherwise with the successor institution or with FDIC or RTC.

Deed Versus Copy of Purchase and Assumption Agreement.

The RTC or FDIC often transfers the assets of a Failed Institution to a New Institution by a Purchase and Assumption Agreement.

Company Policy:

If the RTC or FDIC offers to record only the Agreement and not a Deed transferring its title, please call our Underwriting Personnel. Also check for statutory liens (such as judgment and tax liens) recorded against the Failed Institution after the recording of the Agreement in your local records.

If the Record Title was vested in XYZ Savings and Loan Association, and the Deed or other transfer is being executed by XYZ FSB, you should assume that the RTC transferred the assets of the first institution to a new institution with a similar name. You should then require recordable documentation (such as a Master Deed, Appointment as Receiver, and Power of Attorney or Purchase and Assumption Agreement).