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United States : FDIC sells 40 percent stake in AmTrusts bad loans.

The Federal Deposit Insurance Corp. has sold a 40 percent stake in nearly $900 million worth of loans that once belonged to AmTrust Bank. The FDIC inherited the delinquent loans after it seized the crippled Cleveland bank in December.

The FDIC is keeping a 60 percent interest in the loan portfolio in hopes the loans will produce something in the future. All of the loans are either delinquent or in foreclosure; about half are in California or Florida. If the loans get restructured and the borrower gets back on a payment schedule, the loans can generate income.

A consortium made up of Residential Credit Solutions Inc., CarVal Investors and RBS Financial Products Inc. bought the 40 percent stake. Proceeds of such asset sales go to bank creditors.

The deal has no impact on the FDIC's claim that AmTrust's former parent, now known as AmFin Financial Corp., should repay the FDIC at least $518.6 million. That's how much money AmTrust Bank needed but didn't have in order to stay in business last year.

The FDIC insurance fund spent $2 billion to cover loan losses and administrative expenses after the agency took control of AmTrust in December. Within two weeks of the failure, the FDIC said it might sue AmTrust's former parent for the full $2 billion. AmTrust's parent had filed for bankruptcy protection days before the bank failed.

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Date:Jul 27, 2010
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