Home Insurance US government to sell off $13B of mortgage bonds from failed banks Signature and SVB

US government to sell off $13B of mortgage bonds from failed banks Signature and SVB

by Joshua Garcia

The U.S. government is currently in the process of selling $13 billion worth of mortgage bonds acquired after the failures of Silicon Valley Bank (SVB) and Signature Bank earlier this year. These bonds are part of a larger $114 billion in assets recovered by the Federal Deposit Insurance Corporation (FDIC) when it assumed control over both banks.

The bonds in question are backed by “long-term, low-rate” loans primarily made to developers of low-income multifamily apartment complexes. As the FDIC prepares to sell these bonds, it has explored various options to maximize their value, including repackaging the associated debt into new securities. Bloomberg reports that BlackRock Financial Market Advisory has engaged in preliminary conversations with investors regarding these bonds.

This latest development stems from the FDIC’s decision in April to sell a portfolio of $114 billion in mortgage-backed securities (MBS) it obtained after seizing control of the banks. The FDIC retained BlackRock to handle the sale, and the process is now underway. Additionally, in March, First Citizens Bank & Trust Company announced its intention to acquire all of SVB’s deposits and loans that were shifted to an FDIC-created bridge bank following the bank’s collapse.

The sale of these mortgage bonds represents the ongoing effort by the U.S. government and financial institutions to handle the aftermath of bank failures. By selling the assets acquired from failed banks, the government can recoup losses and potentially avoid any negative impacts on the financial system. These transactions also serve to reestablish stability and confidence in the banking sector.

The sale of these mortgage bonds will undoubtedly attract the attention of investors seeking opportunities in the housing market. The low-rate loans secured by the bonds may present an attractive investment opportunity, particularly for those interested in supporting the development of low-income housing. As the FDIC proceeds with the sale, it will likely carefully consider the market conditions and investor demand to ensure the best possible outcome.

Overall, the sale of these mortgage bonds demonstrates the U.S. government’s dedication to resolving the aftermath of bank failures in a strategic and efficient way. By leveraging the expertise of financial institutions like BlackRock, the government can optimize the value of these assets and mitigate any potential negative impacts on the market. As the sale proceeds, it will be interesting to see how investors respond and what impact the transaction may have on the housing market as a whole.

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