Freddie Mac Update: A Look at Non-Performing Loans

Reaching into its mortgage-related investments portfolio, it announced the auctioning of 2,806 non-performing residential first lien loans (NPLs), according to Freddie Mac.

Specialized Loan Servicing LLC currently services the loans, with a balance of $464 million. The anticipated settlement date of the transaction is in December. Through its advisors, Freddie Mac initiated the marketing of the transaction to potential bidders—including, among others, non-profits and Minority, Women, Disabled and LGBT--on September 8. Oct. 15 is the deadline for qualified bids for the impending Extended Timeline Pool Offering, made up of a reduced pool of loans.

The loans were offered as four separate pools of mortgage loans for the SPO offerings.

Among the triumphant in the SPO pools and winning bids were Unpaid Principal Balance Loan Count and Average Months Delinquent.

Wells Fargo Securities, LLC and First Financial Network, Inc., a woman-owned business, served as advisors on the transactions.

Freddie Mac’s sold $8.4 billion of NPLs and securitized more than $66.5 billion of RPLs. They’re comprised of $29.0 billion via fully guaranteed PCs, $28.3 billion via Seasoned Credit Risk Transfer (SCRT) senior/sub securitizations, and $9.3 billion via Seasoned Loans Structured Transaction (SLST) offerings.

In June, the Federal Housing Finance Agency (FHFA) released a report on the sale of non-performing loans (NPLs) by Fannie Mae and Freddie Mac.  The (GSE) Non-Performing Loan Sales Report includes information about NPLs sold through December 31, 2019 and reflects borrower outcomes on NPLs sold through June 30, 2019 and reported through December 31, 2019, DSNews reported at the time.

The sale of NPLs reduces the number of delinquent loans GSE portfolios and transfers credit risk to the private sector.  FHFA and the Enterprises impose requirements on NPL buyers designed to achieve more favorable outcomes for borrowers than foreclosure.

This report showed that, through December 31, 2019, the Enterprises sold 126,757 NPLs with a total unpaid principal balance (UPB) of $23.8 billion.

NPLs sold had an average delinquency of 2.9 years and an average loan-to-value ratio of 91%. The average delinquency for pools sold ranged from 1.4 years to 6.2 years.

NPLs in New Jersey, New York and Florida represented nearly half (44%) of the NPLs sold. These three states accounted for 47% of the Enterprises' loans that were one year or more delinquent as of December 31, 2014, prior to the start of NPL program sales in 2015.