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In an ongoing effort to reduce the number of non-performing loans in the portfolios of Fannie Mae and Freddie Mac and transfer risk to the private sector, the GSEs' conservator, the Federal Housing Finance Agency, on Monday announced enhanced requirements for the sales of non-performing loans by the GSEs. The enhanced requirements are based in part on a review of Freddie Mac's initial two sales of NPLs in the last year in addition to other considerations.
FHFA expects the enhanced requirements to encourage broad participation by potential investors and also provide for future publication of aggregate data about borrower outcomes. The enhanced requirements include: requiring bidders to identify servicing partners at the time of qualification, and also requiring bidders to complete a questionnaire to demonstrate a record of successful loan resolution through foreclosure alternatives; and requiring the new servicer to evaluate all pre-2009 borrowers whose property is vacant or has an imminent foreclosure sale date for the government's Home Affordable Modification Program.
Fannie Mae and Freddie Mac should take on more risk-sharing transactions, according to a vast majority of survey respondents in the March 2015 Mortgage Industry Outlook Report released Monday by The Collingwood Group and The Five Star Institute. According to the survey, 85 percent of respondents said the GSEs should be involved in more risk-sharing transactions because such transactions allow private market participants to invest in the credit performance of the GSEs' book of business, ultimately limiting taxpayer risk while Fannie Mae and Freddie Mac remain under conservatorship of the FHFA.
