Fannie Mae Details Delinquency Buyback Plan

The nation's largest mortgage financier says it will purchase approximately 150,000 to 200,000 seriously delinquent loans from mortgage-backed securities (MBS) holders this month.

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""Fannie Mae announced"":http://dsnews.comarticles/fannie-mae-to-purchase-delinquent-loans-from-mbs-trusts-2010-02-11 in February that it would start buying back bad loans from MBS investors in bulk because it was cheaper to hold the loans in its own portfolio than continue making guarantee payments when the mortgages were in default. But at the time, the GSE's timeline for such purchases was vague. The company outlined additional details this week.

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As of December 31, 2009, Fannie Mae's single-family MBS loans that were considered seriously delinquent â€" meaning they were at least 120 days past due â€" totaled $127 billion.

The GSE says after March buybacks of up to 200,000 past due mortgages, it will continue purchasing loans in each of the subsequent few months until the company has ""substantially reduced"" the current population of loans that are four or more months delinquent.

Fannie Mae said in determining which loans to purchase, priority will be given to mandatory purchases, such as modified loans and those that are 24 months delinquent. Priority will also be given to loans with the highest MBS pass-through rates and those with the highest unpaid principal balances, the GSE said.

""Analysis by Barclays Capital"":http://dsnews.comarticles/gses-delinquency-buybacks-create-capital-need-2010-02-17 says that because the pipeline of Fannie Mae’s seriously delinquent loans is so large, the GSE will need to come up with about $100 billion over the next three months to facilitate its planned buyouts.

As ""DSNews.com previously reported"":http://dsnews.comarticles/freddie-mac-to-buy-back-more-than-71-billion-in-delinquent-loans-2010-02-10, Freddie Mac also announced in February that it will be buying back overdue mortgages. Its seriously delinquent MBS loans totaled $71 billion as of the end of last year. Freddie plans to have completed its purchases by the end of March.