Housing advocates have been calling for government agencies to sell more non-performing mortgage loans to non-profits. With the announcement of Fannie Mae's latest non-performing loan (NPL) auction, they are partially getting their wish.
Fannie Mae’s latest NPL auction includes a smaller pool of geographically-concentrated, high occupancy loans marketed to encourage participation from non-profits, smaller investors, and minority- and women-owned businesses (MWOBs), according to an announcement from Fannie Mae.
The NPL sale includes four larger pools of loans with a combined 8,200 deeply delinquent single-family residential mortgage loans totaling approximately $1.5 billion in unpaid principal balance (UPB). The sale also includes a smaller Community Impact Pool featuring 80 non-performing loans focused in the Miami, Florida area, totaling about $20 million in UPB, available to qualified bidders.
Community Impact Pools are targeted to include participation from non-profits, smaller investors, and MWOBs. The Community Impact Pool up for bids is the third being offered by Fannie Mae since it began selling non-performing loans last year; the winner of both of the previous two Community Impact Pools was non-profit New Jersey Community Capital.
Bids are due from qualifying bidders for the four larger pools on May 5 and for the Community Impact Pool on May 19, according to Fannie Mae.
“Selling severely delinquent loans can benefit communities and reduce risk for taxpayers. We will continue to structure pool sales to encourage participation from non-profits and minority- and women-owned businesses.”
Joy Cianci, Fannie Mae
“The non-performing loans that are included in today’s sale announcement have been previously solicited for loss mitigation opportunities by Fannie Mae servicers, but they unfortunately remain seriously delinquent. We believe other investors will offer additional opportunities for these borrowers to avoid foreclosure. We are also pleased to build on the success of our Community Impact Pool sales,” said Joy Cianci, Fannie Mae’s SVP for Single Family Credit Portfolio Management. “Selling severely delinquent loans can benefit communities and reduce risk for taxpayers. We will continue to structure pool sales to encourage participation from non-profits and minority- and women-owned businesses.”
Agency NPL sales practices have come under intense criticism recently from progressive groups and housing advocates who claim that the Wall Street investors and private equity firms that buy up a majority of the delinquent loans are interested only in financially benefiting from the foreclosure crisis and not in stabilizing neighborhoods or achieving the best borrower outcomes. A coalition is currently circulating a petition demanding that HUD Secretary Julián Castro reform HUD’s distressed loan sale program to require the loans to be sold to non-profits.
Both FHFA and HUD have made changes to their respective distressed loan sale programs in the last year aimed at improving borrower outcomes. FHFA announced enhanced requirements for bidders in Fannie Mae’s and Freddie Mac’s NPL sales in March 2015. Among other requirements, the terms of Fannie Mae’s NPL transactions require the owner of the loan to market the property exclusively to owner-occupants and non-profits before offering it to investors when foreclosure cannot be avoided.
Click here for more information on Fannie Mae’s NPL sales or to register to bid.