Thanks for the info. Here's the real boilerplate:
Loss sharing is a feature that the Federal Deposit Insurance Corporation (FDIC) first introduced into selected purchase and assumption (P&A) transactions in 1991. The original goals of loss sharing were to (1) sell as many assets as possible to the acquiring bank and (2) have the nonperforming assets managed and collected by the acquiring bank in a manner that aligned the interests and incentives of the acquiring bank and the FDIC. Under loss sharing, the FDIC agrees to absorb a significant portion of the lossâtypically 80 percentâon a specified pool of assets while offering even greater loss protection in the event of financial catastrophe, and the acquiring bank is liable for the remaining portion of the loss.
Eventually, loss sharing was structured to include a âtransition amountâ so that if losses exceeded the projected amount, the FDIC and the acquirer would share the losses on a 95/5 basis, respectively. The transition amount was defined as the FDICâs estimate of the loss on the loss share assets acquired by the acquirer. The transition amount was used by the FDIC to address the acquirerâs concerns about catastrophic losses resulting from limited due diligence time and uncertain collateral values stemming from deteriorating markets.
Source: http://www.fdic.gov/bank/historical/managing/history1-07.pdf
Loss sharing is a feature that the Federal Deposit Insurance Corporation (FDIC) first introduced into selected purchase and assumption (P&A) transactions in 1991. The original goals of loss sharing were to (1) sell as many assets as possible to the acquiring bank and (2) have the nonperforming assets managed and collected by the acquiring bank in a manner that aligned the interests and incentives of the acquiring bank and the FDIC. Under loss sharing, the FDIC agrees to absorb a significant portion of the lossâtypically 80 percentâon a specified pool of assets while offering even greater loss protection in the event of financial catastrophe, and the acquiring bank is liable for the remaining portion of the loss.
Eventually, loss sharing was structured to include a âtransition amountâ so that if losses exceeded the projected amount, the FDIC and the acquirer would share the losses on a 95/5 basis, respectively. The transition amount was defined as the FDICâs estimate of the loss on the loss share assets acquired by the acquirer. The transition amount was used by the FDIC to address the acquirerâs concerns about catastrophic losses resulting from limited due diligence time and uncertain collateral values stemming from deteriorating markets.
Source: http://www.fdic.gov/bank/historical/managing/history1-07.pdf