Freddie Mac recently announced it sold via auction 2,243 non-performing residential first lien loans (NPLs) from its mortgage-related investments portfolio. The loans, with a balance of approximately $369 million, are currently serviced by Specialized Loan Servicing LLC. The transaction is expected to settle in January 2020. The sale is part of Freddie Mac’s Standard Pool Offerings.
Winning bidders of this sale were InSolve Global Credit Fund IV, L.P. for Pool 1, VRMTG ACQ, LLC for Pools 2 and 3, Truman 2016 SC6, LLC for Pool 4.
Freddie Mac, through its advisors, began marketing the transaction on October 8 to potential bidders, including non-profits and Minority, Women, Disabled, LGBT, Veteran or Service-Disabled Veteran-Owned Businesses, neighborhood advocacy organizations and private investors active in the NPL market. Bids for the upcoming Extended Timeline Pool Offering (EXPO), which is a smaller sized pool of loans, are due from qualified bidders by November 14, 2019.
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.
Given the delinquency status of the loans, the borrowers have likely been evaluated previously for or are already in various stages of loss mitigation, including modification or other alternatives to foreclosure, or are in foreclosure. Mortgages that were previously modified and subsequently became delinquent comprise approximately 63% of the aggregate pool balance. Additionally, purchasers are required to solicit distressed borrowers for additional assistance except in limited cases and ensure all pending loss mitigation actions are completed.