According to a response by the FDIC to questions from GlobeSt.com, recovery is a “term of art” meaning the proceeds from sales of assets.
“Recovery usually means that if any of those loans fail, they’re on the balance sheet,” Mayra Rodriguez Valladares, managing principal of banking consulting firm MRV Associates, tells GlobeSt.com. “Let’s say JP Morgan is able to get back 50% [of the loan] as the recovery. The loan fails, the FDIC is the first lien here.” If the 80-20 split is in play, then the FDIC would get 40% of the original amount of the loan and JPMorgan would receive 10%.
This still leaves open the potential for JP Morgan to review the status of loans. “The portfolio is pretty good from a credit perspective,” says Rodriguez Valladares.