GSE NPL Sales: Working Toward ‘Favorable Outcomes for Borrowers’

According to the Federal Housing Finance Agency (FHFA), Fannie Mae and Freddie Mac have completed a total of 117,466 nonperforming loan sales as of December 31, 2018. The FHFA’s Enterprise Non-Performing Loan Sales Report states that these sales held a total unpaid principal balance (UPB) of $22.2 billion.

According to the FHFA, the purpose of the sale of non-performing loans (NPL) by the GSEs is to reduce the number of delinquent loans held in their inventories and transfers credit risk to the private sector.  

“The sales help achieve more favorable outcomes for borrowers and local communities than the outcomes that would be achieved if the Enterprises held the NPLs in their portfolios,” the FHFA states. “The sales also help reduce losses to the Enterprises and to taxpayers.”

The NPLs sold by Fannie and Freddie as of December 31 had an average delinquency of 1.4 to 6.2 years and an average loan-to-value ratio of 92%. Nearly half of the loans sold (45%) are from New Jersey, New York and Florida. The FHFA states that prior to the start of NPL program sales in 2015, these three states accounted for 47% of the GSE’s loans that were one year or more delinquent.

According to the FHFA, NPLs sold by the GSEs on occupied homes had the highest rate of foreclosure avoidance outcomes, at 33.5% compared to 14.3% for vacant properties. Likewise, these vacant properties had a significantly higher rate of foreclosure, at 72.9% compared to 32.2% for borrower occupied properties.

Fannie Mae’s last NPL sale included 4,300 loans totaling $770.13 million in UPB. The winning bidders of the four pools for the transaction, expected to close on July 23, 2019, were Igloo Series IV Trust (Balbec Capital, LP) for Pool 1, MFRA Trust 2015-1 (MFA) for Pool 2, Elkhorn Depositor LLC (Roosevelt Mortgage Company, LLC) for Pool 3, and VRMTG ACQ, LLC (VWH Capital Management, LP) for Pool 4.

Fannie Mae originally announced this NPL sale on May 14, 2019, a day after Freddie Mac announced the completion of its auction of 1,789 non-performing residential first lien loans (NPLs) from its mortgage-related investments portfolio on Tuesday. The loans totaled around $307 million, and are currently serviced by NewRez LLC, doing business as Shellpoint Mortgage Servicing. The transaction is expected to settle in July 2019.