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FHFA Sells Over 72,000 NPLs at a Gain of $14.2 Billion

On Thursday the Federal Housing Finance Agency (FHFA) released its third Enterprise Non-Performing Loan Sales Report, which lists all sales of all non-performing loans (NPLs) from Freddie Mac and Fannie Mae (The Enterprises) to the private sector through December 31, 2016. Sales of NPLs by the Enterprises is a relatively new practice, beginning in 2014, and was started with the intention of offloading negative accounts from The Enterprises’ portfolio to reduce loss and thereby save taxpayers money. It also sought to reduce blight and help communities retain value by imposing restrictions on would-be purchasers of NPLs to limit foreclosures. As such, the report chronicles both financial statistics of the Enterprises as well as borrower outcomes in order to observe both goals.

As of 2016 year end, the report states that the Enterprises have sold 72,502 NPLs in delinquency with a sum of $14.16 billion of total unpaid principle balance, with a mean delinquency time of 3.4 years. Freddie Mac accounted for 32,448 loans at $6.6 billion and an average delinquency time of 3.1 years; while Fannie Mae sold 40,054 loans at the cost of $7.5 billion and an average delinquency of 3.6 years.

Forty-eight percent of the total NPL’s sold came from New York, New Jersey, and Florida, which also accounted for 47 percent of The Enterprises’ loans that were over one year delinquent by year end 2014.

The borrower outcomes, however, are only based on 45,446 NPLs that were settled by June 30, 2016 and reported through December 31, 2016. The report found that occupied homes had a far less foreclosure rate (16.6 percent) than vacant properties (38.5 percent), and completely avoided foreclosure 18.8 percent of the time as opposed to 10.1 percent. In addition, loans sold by the Enterprises to third parties avoided foreclosure more often than loans that weren’t sold.

You can find both the initial report on NPL sales and borrower outcomes and the second report on the FHFA’s website. The FHFA says it will continue to monitor and report their findings on an ongoing basis.

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