To satisfy these requirements, RTC established its minority preference resolutions program in February 1994. 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. We subsequently met with them to understand their experiences in purchasing loans from RTC under the minority preference resolutions program. RTC Established a Reasonable Process for Pricing Mortgage Loans

The pricing of mortgage loans is a difficult and complex process requiring the use of a sophisticated and technical methodology. 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. 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. As of October 11, 1995, 11 minority acquirers had purchased 4,063 mortgage loans for $289.6 million.
Why GAO Did This Study

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.

What GAO Found

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 for $289.6 million; (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; and (5) RTC did not adopt the loan pricing methodology proposed by minority acquirers who believed the mortgage loans were over priced, since it believed the existing methodology established a fair market value for the loans.