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Cut-rate sale of First NBC loans could have 'disruptive' effect on New Orleans real estate market


"What's going to happen to that real estate?" Waters said. "Is it going to be sold ... which has 19 branches in southeast Louisiana. “If you're expecting that, then you're probably going to need to work it out through either a restructuring, a bankruptcy ...


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Pedestrians walk by the late First NBC Bank Operations door on Baronne street in the Central Business District in New Orleans, Friday, June 9, 2017. Advocate Staff photo by SOPHIA GERMER Facebook Twitter Email Print Save Buy Now The First NBC Bank sign is blocked out above an ATM on Baronne street in the Central Business District in New Orleans, Friday, June 9, 2017. Advocate Staff photo by SOPHIA GERMER Facebook Twitter Email Print Save Buy Now A Whitney Bank sign hangs over the First NBC Bank sign on Baronne street in the Central Business District in New Orleans, Friday, June 9, 2017. Advocate Staff photo by SOPHIA GERMER Facebook Twitter Email Print Save Buy Now Pedestrians walk by an ATM with the blocked out First NBC sign on Baronne street in the Central Business District in New Orleans, Friday, June 9, 2017. Advocate Staff photo by SOPHIA GERMER Facebook Twitter Email Print Save jQuery(document).ready(function($){ $('#photo-carousel-f91f5180-d128-11e7-8fc7-47ed12de0b9c').on('show.bs.modal', function(e){ $('#fixed-leaderboard-top-container').addClass('overlay-leaderboard'); }); $('#photo-carousel-f91f5180-d128-11e7-8fc7-47ed12de0b9c').on('hide.bs.modal', function(e){ $('#fixed-leaderboard-top-container').removeClass('overlay-leaderboard'); }); }); jQuery(document).ready(function($){ function asset_prevNextContent(oAsset, sPos){ var sPosTitle = (sPos === 'prev') ? 'Previous' : 'Next Up'; var sPosDir = (sPos === 'prev') ? 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Advocate Staff photo by SOPHIA GERMER Buy Now The First NBC Bank sign is blocked out above an ATM on Baronne street in the Central Business District in New Orleans, Friday, June 9, 2017. Advocate Staff photo by SOPHIA GERMER Buy Now A Whitney Bank sign hangs over the First NBC Bank sign on Baronne street in the Central Business District in New Orleans, Friday, June 9, 2017. Advocate Staff photo by SOPHIA GERMER Buy Now Pedestrians walk by an ATM with the blocked out First NBC sign on Baronne street in the Central Business District in New Orleans, Friday, June 9, 2017. Advocate Staff photo by SOPHIA GERMER Facebook Twitter Email Print Save #ndn-video-player-1.ndn_embedded .ndn_floatContainer { margin-top: 10px; margin-bottom: 20px; } var _ndnq = _ndnq || []; _ndnq.push(['embed']); #ndn-video-player-2.ndn_embedded .ndn_floatContainer { margin-top: 10px; margin-bottom: 20px; } var _ndnq = _ndnq || []; _ndnq.push(['embed']); Right up until it collapsed this spring, First NBC Bank made a business out of issuing risky loans.And it was an unusually forgiving lender, according to a recent report from federal regulators, often giving out new loans simply to help borrowers pay back previous ones.So the question reverberating around New Orleans, where the bank's lending helped fund numerous projects and businesses, is what happens now that so many of those loans have been snapped up by out-of-town investors who may not have the same patience. Some experts worry that the bank's implosion may ultimately hurt local real estate prices, curtail the availability of credit and threaten the viability of ongoing development projects."Now you have a lot of property that's in the hands of some out-of-state owner," said Kyle Waters, a former president of Metairie-based Omni Bank, which was acquired by IberiaBank in 2011."What's going to happen to that real estate?" Waters said"Is it going to be sold? Is it going to be liquidated by people who can't pay? Some of it is going to go on the market, and what's that going to do to the price of real estate?"The loans in question first landed with the Federal Deposit Insurance Corp., the U.Sbanking regulator that suddenly owned the bulk of First NBC’s assets when the bank was ordered closed April 28 in the costliest failure of an American bank since the height of the 2008-10 financial crisis.Having sold First NBC's best assets to Whitney Bank, the agency recently sought other buyers for nearly $1 billion worth of the bank's loans — some of them good, some of them shaky, some of them in default or close to it.The loans, pooled into more than a dozen groups, netted about $367 million at auctionThat's only about 40 cents on the dollar, suggesting just how tattered the portfolio was at the time of the bank's implosion.Now, the bulk of those loans are in the hands of nine out-of-state investors that won the bidding, a group made up mostly of hedge funds with unfamiliar-sounding names.Local experts say several things may happen nextIf borrowers are at risk of missing loan payments, they could try selling the property to pay off their mortgage, pocketing any profit.Likewise, a new lender could turn to foreclosure to recoup the loan principal; because they bought the loans at a deep discount, they may be able to turn a profit even if they end up selling at a below-market price.It seems unlikely that the new lenders will be as flexible as First NBC wasIn a report released this month, the FDIC’s inspector general said the bank issued or renewed loans to distressed clients even after their long-term prospects were exposed as questionable, in some cases for larger amounts and easier terms than other banks would have granted."Most lenders are not going to lend you money to make payments,” said Guy Williams, president and CEO of New Orleans-based Gulf Coast Bank and Trust, which has 19 branches in southeast Louisiana.“If you're expecting that, then you're probably going to need to work it out through either a restructuring, a bankruptcy or foreclosure, and hope for the best," Williams said.More than a month after the sale of First NBC’s loan portfolio, the new buyers haven't publicly signaled their plansBut one Minnesota-based credit shop issued a statement downplaying the significanc

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