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The State of Re-Performing Loans

GSE loansVolume for re-performing residential whole loan valuations was strong in Q1 2018, continuing a steady stream of available product over the past 18 months. That’s according to a recent webinar hosted by MountainView Financial Solutions [1], which examined both the current state of the re-performing loan [2] (RPL) market and where things are likely to be headed in the months to come.

The webinar features insights from three of MountainView’s subject-matter experts, including Brian Dunn, CFA, Managing Director, Analytics; Nata Callard, CFA, Managing Director, Analytics; and Mike Kelleher, VP, Business Development. During the presentation, the three of them discussed how fund-to-fund trades have dominated MountainView’s recent offerings, but both banks and the GSEs [3] have also been active sellers within this space.

According to the presentation, pricing has also been strong for RPL valuations. The presentation explained that “larger pools with consistent cash flows and high-quality underlying collateral can price to yields below 5 percent.”

The presentation delved into “5 Essential Topics for Analysts and Investors,” including:

Freddie Mac [4] recently priced its second Seasoned Credit Risk Transfer [5] Trust offering of 2018, totaling around $1.6 billion and consisting of “8,628 fixed- and step-rate modified seasoned re-performing loans.” As detailed in the GSE’s press release, this securitization includes both guaranteed senior and unguaranteed subordinate securities. Freddie’s statement explains that “the SCRT securitization program is a key part of Freddie Mac's seasoned loan offerings to reduce less liquid assets in its mortgage-related investments portfolio and shed credit and market risk via economically reasonable transactions.”

Freddie’s statement noted that the loans were modified to help borrowers at risk of foreclosure [6] and had since been performing for at least 12 months as of issuance.

To learn more about re-performing loans, you can click here [7] to view the full recording of MountainView Financial Solutions’ webinar.