The 1980’s started with a bang. Aggressive real estate investing has run its course and crushed USA economy tough collapse of savings and loan associations. USA faced a new financial crisis swatting the real estate and the government alike. Once again foreclosure reared its ugly hear, banks busted at the seams with REO Properties and real estate investors everywhere rejoiced. Principe was the same with some subtle differences. This time around more investors were aware of just how to take advantage of the Bank Owned Bulk REO Properties.
Amidst the new economic crisis, USA Government came up with a bailout bill to limit the damage by merging or closing down the insolvent savings and loan institutions. Resolution Trust (RTC), USA government-owned asset Management Company was created and charged with liquidating properties and assets deemed insolvent by the Office of Thrift Supervision, ie. the Office of Bank Supervision.
The RTC mission?
Dispose of the Bank Owned Bulk REO Properties as quickly as possible for maximum value.
The goal?
Reduce taxpayer exposure.
And – make money!
To ensure no ground was left uncovered, RTC implemented five distinct partnership programs, Multiple Investor Fund (MIF), N-Series and S-Series Mortgage Trusts, Land Fund and JDC Program. When initial unsuccessful attempts to capitalize on the bulk resale of insolvent (read Bank Owned Bulk REO) properties failed to bring desired profits, RTC came up a strategy that took the game to the next level. Understanding that increasing demand runs the sales under any conditions, RTC concentrated on generating and increasing interest in Bank Owned REO Bulk Properties. What a better way to do so than by launching brand new “equity partnership” program. Trough equity partnerships RTC single handedly pushed for Bank Owned REO Bulk Properties management and sales on their own terms.
Private sector equity partners inflated the interest in Bank Owned Bulk REO Properties, while RTC controlled the management, distribution and sales. In other words, RTC successfully executed the drive and demand driving the “ka-ching!” trough the roof.
The strategy was simple. Swoop in and seize Bank Owned Bulk REO Properties. Generate interests. Then resell the same assets to bargain-seeking investors. The strategy worked like a charm. By 1990’s RTC moved some 747 Bank Owned REO Properties, owned 350, generated $400 billions and deservedly tapped itself on a shoulder for having the foresight to move money during economic crisis.
But all good things must come to an end and so did RTC. By 1995, economic crisis fizzed out and RTC derailed to Savings Association Insurance Fund (SAIF) under the Federal Deposit Insurance Corporation. Following the fate of many insolvable properties it handled for a decade, RTC too was then dissolved and most assets sold.
The good times rolled, the money lasted for a long while and the lessons learned were invaluable to future real estate investors. Get going while the going is good! Or you just might miss the train” and that is a one way ticket”
