Later this year, Fannie Mae will begin securitizing reperforming mortgage loans (RPLs) on its balance sheet, according to an announcement from Fannie Mae on Monday.
Reperforming mortgage loans are those that were delinquent at one point but subsequently returned to current status. Fannie Mae completed 6,592 loan modifications in February; the reperforming loans that will be packaged for securitization include loans that returned to current status either with or without the help of a loan modification, according to Fannie Mae.
The securitization of these loans gives Fannie Mae the option of further reducing its retained mortgage portfolio by selling the mortgage-backed securities to investors. The portfolio contracted at an annual rate of 27.8 percent in February, which translated to a month-over-month decline of more than $11 billion down to a value of about $337.2 billion by the end of the month, according to Fannie Mae’s February 2016 Monthly Volume Summary. Fannie Mae’s mortgage portfolio has contracted in all but four months since June 2010; at the beginning of that stretch, the amount of unpaid principal balance (UPB) of the loans in the portfolio was $818 billion.
“With these securitizations we’ll have more flexibility to manage our risk and reduce the size of our portfolio,” said Bob Ives, VP of Retained Portfolio Asset Management at Fannie Mae. “Over the long run, these securitizations can benefit investors, Fannie Mae, and taxpayers.”
Fannie Mae has announced enhanced loan level disclosures for this population of RPLs; the enhanced disclosures will include updated credit scores at issuance, delinquency status, and modification details. Fannie Mae will also provide rounded unpaid principal balances for this round of RPLs due to borrower privacy considerations, and the early notification of the program is designed to allow market participants to prepare their systems to accept new data, according to Fannie Mae.
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