Del Mar Man Has Plan to Cut Cost of S&L; Bailout
Businessman Bob Dyson has stirred up congressional interest in a plan that is designed to cut the cost of bailing out the nation’s troubled savings and loan industry and, at the same time, make affordable housing available to a greater number of Americans.
Dyson, a Del Mar real estate broker who served as president of Red Carpet Realty during the early 1980s, plans to present his “Incentive Resolution Plan” to Housing and Urban Development Secretary Jack Kemp in October. HUD staff members are reviewing Dyson’s plan, according to spokesmen for two area congressmen.
Dyson’s S&L; plan would dramatically change the way the federal Resolution Trust Corp. disposes of assets seized when S&Ls; fail. At present, the RTC, which wants to raise cash quickly, generally demands that buyers pay cash for seized assets. However, congressional critics have panned the RTC for selling assets at cut-rate prices in order to move property owned by the failed S&Ls.;
Dyson wants the RTC to stop offering properties at discounts to cash buyers and instead offer them at market value to the growing number of Americans who are being shut out of the market. Receiving full-market value for assets of failed S&Ls; would boost the amount of money flowing into the U.S. Treasury and lessen the need for taxpayer assistance in paying for failed S&Ls;, Dyson said.
However, Dyson’s plan probably would require congressional action to create a new kind of loan, which would be offered to Americans who lack the money needed for down payments or whose credit histories are blemished. The mortgages would subsequently be bundled together and sold on the secondary market.
Dyson’s proposal to expand the universe of potential home buyers has caught the attention of local congressmen who are sorely aware that only 30% of Americans can afford to buy a home.
The plan could “potentially save the taxpayers a lot of money by allowing taxpayers to get full value” on property that the federal government seizes along with failed S&Ls;, said U.S. Rep. Duncan Hunter (R-Coronado). “Dyson’s general premise is a sound one . . . but we need to do a lot of analysis.”
“Fire sales are not the solution, but fire sales are the order of the day with the RTC,” said Hunter, who complained that cash-rich buyers can find windfalls by paying $.20 or $.30 on the dollar for RTC-owned properties.
“We can save the taxpayers a lot of money if we don’t have these fire sales,” Hunter said. “If done skillfully, (sales) can be structured in a way where the assurance of a (solid) return to the U.S. Treasury is very high.”
Many real estate industry observers believe that the RTC’s cash-only deals are likely to disrupt already-threatened residential markets, said Herman Smith, a past-chairman of the Washington-based National Assn. of Home Builders. “When you’re marking down (properties) at a tremendous discount, it affects both the comparables in the area and ad valorem taxes,” said Smith, a Fort Worth, Tex., builder who was in San Diego last week for an NAHB meeting.
Just as important, Hunter said, Dyson’s proposal would “develop a larger pool of home buyers” who are now shut out of the home market. And it would eliminate the possibility of windfall profits under the RTC’s current cash-only system.
“The average couple making $40,000 a year might be able to swing a mortgage for $80,000 or $90,000,” Hunter said. “But they can’t possibly find $20,000 or $30,000 to buy some of these properties.”
If suitable financing were made available, potential home buyers would eventually “return two to three times as much for some of these properties,” Hunter said. “I like the concept of (Dyson’s) plan.”
“The proposal raises some interesting possibilities,” said Ben Haddad, chief of staff for U.S. Representative Bill Lowery (R-San Diego). “Our review encourages us to go further. Because of (Dyson’s) background and the elements of his plan, this is not just a fly-by-night proposal.”
“RTC is experiencing difficulties now,” Haddad said. “They don’t have all the answers on the best way to dispose of these real estate properties. . . . Dyson appears to have a win-win type of solution.”
Dyson wants to demonstrate his plan by selling the assets of a failed thrift in Oklahoma. “We can prove it by selling 70% of (the S&L;’s properties) in 120 days,” Dyson said. “I can guarantee that people will line up to buy these properties at fair market value.”
The test will be ruled a success if Dyson can turn “non-performing assets back into performing assets,” he said. “Everybody asks what’s in it for me, but we won’t earn a dime for our efforts until we perform.”
A key element of Dyson’s plan is the establishment of a new type of mortgage that would be awarded to consumers who now lack down payments or whose credit history keeps them out of the home-buying market.
The government would make those consumers “demonstrate that they can work their way back into credit-worthiness” by making payments for a year. Dyson said the RTC would still have the option of marketing properties should their new owners fail to make payments.
“Since the properties are already owned by the RTC or are considered assets of the failed (S&L;), no new money would be needed to complete the sales transaction,” Dyson said. “Discount points and monthly mortgage payments would generate the cash necessary for closing costs . . . normally charged to the seller.”
During the early 1980s, Dyson served as president of financially troubled Red Carpet Realty. He initiated a turnaround that helped the real estate franchising firm eliminate debts and contingent legal liabilities totaling $60 million.
In addition to lobbying Congress, Dyson has been appearing before large organizations such as the NAHB in order to drum up support for his plan.
“It is (my) belief that it will take extreme political pressure from the public to move the government in any other direction than the course they have selected with the RTC,” he said. “Every day that the RTC is allowed to continue in its present direction costs each and every one of us far more than we would choose to accept.”
