Bill Bartmann on FOX Business Discussing FDIC Loan Auctions and How They Will Increase the Number of Failed Banks

FOX Business: Failing Banks and the FDIC

Bill Bartmann was recently interviewed by FOX Business about the recent and upcoming FDIC loan auctions and how these auctions will increase the number of failed banks.

The interview was streamed live from Bill Bartmann's 5-day intensive workshop on Buying Bad Loans in Palm Springs.

Thus far, the Federal Deposit Insurance Corporation (FDIC) has sold about $4 billion commercial real estate assets seized from failed banks. These sales could trigger devaluations that could signal the end for a number of smaller banks across the country.

The FDIC was scheduled to auction a $400 million portfolio of performing and non-performing assets from the failed Silverton Bank today. This auction would be another heavy blow for Georgia as many of the banks which have already failed this year have come from this state and this auction would certainly endanger many more smaller banks.

This particular $400 million dollar portfolio consists of 62 loans of which 61 are performing. The remaining non-performing loan relates to The W - a 28-storey hotel and condo tower at Allen Plaza. The W has had mixed fortunes with the hotel performing reasonably well but only 1 of the 72 upscale condos has been sold.

The construction of this building was financed by a $87 million dollar loan of which the Silverton held more than $25 million dollars. However, 26 other banks nationwide hold smaller pieces. And this is just the W.

Fulton County Superior Court Judge Jerry W. Baxter has issued a restraining order against the FDIC that stays the auction. The banks along with the Silverton that have stakes in the W have argued that an auction could lead to massive write-downs of capital. This could prove catastrophic for several community banks if they do not have the reserves to offset the losses.

"The FDIC has been selling commercial and residential loans for an average of 43 cents on the dollar for performing and 28 cents on the dollar for non-performing. In some cases where the buyer will be required to invest huge sums of money, the FDIC has sold assets for even less."
Bill Bartmann

Commercial real estate property values have tumbled an average of 40 percent and banks, wanting a lower loan-to-value ratio, are reluctant to refinance their CRE loans. This will trigger a lot of foreclosures – the W has, to date, narrowly escaped foreclosure.

According to a recent report by the Congressional Oversight Panel (COP) there are nearly 3,000 banks currently classified as having a risky concentration of commercial real estate loans. All of them are small to medium-sized banks which have already been weakened by the current economic crisis.

However, many of the loans made were downright reckless and one could say that the chickens are now coming home to roost. The end result is though that many more banks than originally forecast will fail this year.

"The official forecast is that the banking industry could suffer losses of up to $200 billion to $300 billion. I think it will be much worse than that and eventually we will see at least 1000 bank failures."
Bill Bartmann

Ironically, this situation opens the door to a lucrative opportunity for the average person and everyday investor to make money buying bad loans. This is an area that Bill Bartmann specialises in.

The FDIC strategy for loan auctions is to first sell the assets that will generate the largest amount of cash the fastest and then work through the portfolio of assets in a stepwise fashion.

The opportunity for the small, everyday investor to benefit from these loan sales is when charged off consumer loans such as credit cards loans are sold. These can often be obtained for just pennies on the dollar making it relatively easy for the investor to make a profit on their investment upon collecting on those loans

For a FREE video from Bill Bartmann explaining this business opportunity, i.e. how you can make money buying bad loans , in greater detail visit:

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