Loan Asset Sales

OMB Policies Will Result in Program Objectives Not Being Fully Achieved Gao ID: AFMD-86-78 September 25, 1986

In response to a congressional request, GAO provided information on the Office of Management and Budget's (OMB) objectives and guidelines for agencies to follow in selling loan assets.

GAO found that OMB guidelines for loan asset sales: (1) require that all sales be made without future recourse to the federal government; (2) require that purchasers assume responsibility for collecting and servicing loan assets when such assets are sold; (3) would treat the loan asset sales proceeds as borrowings if sales are made with recourse to the government, which would be contrary to normal budgetary treatment of guarantees; and (4) will not assist in accurately measuring credit program subsidies, which is one of the program's objectives. GAO believes that: (1) the guidelines will not protect the government's best interest, since the government will not be maximizing net proceeds on the sale of certain loan portfolios; (2) the proposed budgetary treatment of loan asset sales with limited recourse does not reflect the actual and potential economic consequences of such sales, and is incorrect budgetary treatment; and (3) several of the requirements will result in overstating the subsidies associated with credit programs and, therefore, OMB will not fully achieve its objectives.

Recommendations

Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.

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