Audit of RTC Mortgage Trust 1993-N3

Fdic Oig

Informations

• Publié par: Hamoh
• Nombre de lectures: 104
• Langue: English

Extrait

AUDIT OF RTC MORTGAGE TRUST 1993
Audit Report No. 00 -005
OFFICE OF INSPECTOR GENERAL
OFFICE OF AUDITS
March 17, 2000
-N3-N3
Federal Deposit Insurance Corporation Office of Audits
Washington, D.C. 20434 Office of Inspector General
17, 2000
TO:
FROM:
SUBJECT: Audit of RTC Mortgage Trust 1993 (Audit Report No. 00-005)
This report presents the results of an audit of Resolution Trust Corporation (RTC) Mortgage
Trust 1993
1 Mortgage Trust 1993 -N3, created on October 5,
B
BACKGROUND
-created
trusts, Mortgage Trust 1993 -N3 (the Trust), consisted of 318
On October
n the Trust.

1
. RTC Completion Act of 1993 ongoing as of that date transferred to the FDIC in accordance with the
-related work 31, 1995, marked the RTC’s legislatively mandated sunset date. Responsibility for all RTC December
B interest i oversight responsibilities and oversee its class
investor. The RTC contracted with Aldridge, Eastman, and Waltch (AEW) to assist in its
investors—Bankers Trust, Sterling American Properties, BEI Management, and an individual
consisted of four -N3 Associates, LP, which A certificate to 1993 RTC, in turn, sold the class
B certificate. The noncontrolling class A certificate and the certificates—the controlling class
In exchange for the assets, the RTC received from the trustee cash and two types of equity
their respective obligations under the deposit trust agreement.
the trustee. The trustee was responsible for ensuring that all parties to the transaction fulfilled
5, 1993, the RTC signed a deposit trust agreement with Wilmington Trust Company,
purchased from the RTC as promptly as possible in a manner that maximized economic return.
The objective of the Trust, organized as a Delaware business trust, was to dispose of the assets
million. approximately $324
ith a principal balance of loans w
representing a percentage of beneficial ownership in those trusts. One of those RTC
The RTC had the authority to create trusts that sold, through competitive bid sales, certificates
certificateholder—the RTC.
-N3 Associates, LP—and a class certificateholder—1993 A 1993, consisted of a class
Receiverships (DRR) to audit various trusts.
request from the Federal Deposit Insurance Corporation’s (FDIC) Division of Resolutions and
-N3. The Office of Inspector General (OIG) performed the audit in response to a
Assistant Inspector General
Sharon M. Smith
Division of Resolutions and Receiverships
Asset Management Branch
Gail Patelunas, Deputy Director
March DATE: B
(the bond trustee), issued $104
B
OBJECTIVE, SCOPE, AND METHODOLOGY
5, 19 93, through October 31, 1998.
of the 318
of October 31, 1998.
of the 10

2
December 1999 in accordance with generally accepted government auditing standards.
reliance on the internal control system. The OIG conducted the audit from October 1998 through
could meet the audit objective more efficiently by conducting substantive tests rather than placing
AMRESCO’s system of internal controls because the OIG concluded that it We did not evaluate
million in expenses charged to the Trust. million of the $65.8 In total, we reviewed $18.4
AMRESCO’s servicing fees. certificateholder’s overhead expenses charged to the Trust as well as
A AMRESCO’s and the class under the terms of the Trust’s agreements. We also reviewed all of
, we determined whether related expenses were allowable assets sampled For the first 5
million in revenues as million of the Trust’s $130 settlements or sales. Those assets represented $6
income from loan payments, operation of foreclosed assets, and asset dispositions through
f assets sampled, we tested the receipt o charged the Trust only allowable expenses. For the 10
whether AMRESCO accurately accounted for and properly reported the Trust’s income and
assets to verify the sale or other disposition of assets. We randomly sampled 10
Our audit focused on the Trust’s income and expenses from loan servicing, operating assets, and
Trust’s servicer.
also interviewed personnel from AEW—DRR’s oversight contractor—and AMRESCO—the
applicable FDIC policies and procedures relating to the administration of equity partnerships. We
Management Section, Oversight and Monitoring Branch, DRR. Additionally, we reviewed
To accomplish the objective, we interviewed FDIC personnel from the Agreement and Case
operations from its inception on October
expenses and accurately accounted for and reported income. The audit covered the Trust’s
The objective of the audit was to determine whether AMRESCO charged the Trust only allowable
in January 1996.
certificateholders. The bonds were retired A and class funds were then distributed to the class
liquidated the Trust’s assets, the proceeds were first used to retire the bonds and any remaining
certificateholder A s the class -market transactions. A institutional investors through open
-party -backed bonds to third million of commercial, loan
The Trust, under an agreement with the Bank of America National Trust and Savings Association
name to AMRESCO Management (AMRESCO).
market, and dispose of the Trust’s assets. In November 1994, BEI Management changed its
with one of its partners—BEI Management—to service the Trust’s mortgage loans and manage,
certificateholder entered into a servicing agreement A percent of income. The class remaining 51
certificateholder was entitled to the responsible for the Trust’s daily operations. The class
percent of the Trust’s income and be A certificate provided for the holder to receive 49 The class100
For the 10
1:
Amount Questioned
$ 402,161
454,676
76,629
53,206
101,144
$1,087,816

that the Trust purchased a 50
31,
percent of the net sales proceeds to the RTC for
percent to the Trust’s
ust owed the

3
AMRESCO’s normal servicing responsibilities. The officials added services were in addition to
-house tax consulting officials stated that the in certificateholder A Both AMRESCO and class
certificateholder. A documents against payments to affiliates of either the servicer or the class
the Trust and paid itself despite the prohibition in the Trust’s servicing agreement and other
-house tax consulting group. AMRESCO billed AMRESCO billed the Trust $454,676 for an in
Unallowable Fees Paid to AMRESCO Affiliates
FDIC $402,161 for Miami Savings’ share of the net sales proceeds.
percent of the net sales proceeds to the Trust’s equity. Accordingly, the Tr
certificateholders. Instead, AMRESCO credited equity, which was later distributed to the
-percent share of the loan and credited the remaining 50 Miami Savings’ 50
1995. AMRESCO should have remitted 50
receivership) owned. However, AMRESCO sold the entire loan in a bulk sale on January
-percent interest, which Miami Savings (an RTC The Trust did not purchase the remaining 50
Flagler Savings. -percent participation interest in a loan owned by
certificateholders. The mortgage loan schedule accompanying the assignment of assets showed
percent of the sales proceeds as the Trust’s income, which AMRESCO credited to
-percent participation interest in a loan but recorded 100 Specifically, the Trust purchased a 50
AMRESCO did not remit $402,161 due the FDIC from the sale proceeds of a participation loan.
Participation Sales Proceeds Due to the FDIC
OIG analysis of the Trust’s revenues and expenses. Source:
Total
Unallowable miscellaneous expenses
certificateholder expenses A Unallowable class
Unallowable asset servicing fees
Unallowable fees paid to AMRESCO affiliates
Participation sales proceeds due the FDIC
Category
Summary of Questioned Cost Table
1 summarizes the questioned cost by category. paid from the Trust’s funds. Table
sold but did not own. We also questioned $685,655 of unallowable expenses that AMRESCO
the Trust did not remit $402,161 due the FDIC for its share of a participation loan that the Trust
urately accounted for the Trust’s income. However, sampled assets, AMRESCO acc
RESULTS OF AUDIT
partnerships, owned by the Trust, to take title to foreclosed properties. -
-house
2
2.

$205,665 $180,780 $386,445
51,088 17,143 68,231
$256,753 $197,923 $454,676

2
4
23, 1999). -035 dated August (audit report number 99 -N1 Audit of RTC Mortgage Trust 1992 another report entitled
AMRESCO prepared an analysis of its markup on this and three other trusts based on concerns raised by the OIG in
Source: OIG analysis of the Trust’s expenses.
Total
Temporary employees
AMRESCO employees
Total Billed Markup Direct Cost Employee Status
AMRESCO’s Markup of Tax Consulting Group Costs Table 2:
incurred for the tax consulting group as shown in table
we estimated that AMRESCO billed the Trust $197,923 more than it markups of direct costs,
AMRESCO’s analysis of up its direct cost associated with the tax consulting group. Using
unallowable because of the aforementioned reasons, we also identified that AMRESCO marked
tax consulting group to be While we consider the entire payment made to AMRESCO for its
tax consulting group. questioned $454,676 paid to AMRESCO for its
charges were reasonable and necessary and, in fact, benefited the