[1]Freddie Mac [2] is offering $624.1 million worth of non-performing loans (NPLs) for sale in four pools in an auction of deeply delinquent loans from its mortgage investment portfolio, according to an announcement from the GSE [3] on Wednesday.
Three of the pools of loans are Standard Pool Offerings (SPOs), which total about $600.2 million. One of the pools is an Extended Timeline Pool Offering (EXPO) that includes NPLs 100 percent concentrated in Cook County, Illinois, and serviced by CitiMortgage Inc. The total in unpaid principal balance of the EXPO is $23.9 million.
Potential bidders must be approved by Freddie Mac to access the secure data room that contains information on the NPLs and allows them to bid on the NPLs. Winning bidders and their servicers must meet the Federal Housing Finance Agency (FHFA [4])'s NPL sale guidelines announced on March 2, which include approval by and good standing with government housing agencies (Freddie Mac, Fannie Mae, Ginnie Mae, and the Federal Housing Administration); evaluating borrowers for eligibility in the government's Home Affordable Modification Program (HAMP); and applying a "waterfall" of resolution tactics before resorting to foreclosure.
FHFA, Freddie Mac's conservator, stated [5] in its 2014 Report to Congress [6] released in June that "FHFA's expectation is that the sale of seriously delinquent loans through non-performing loan sales will result in more favorable outcomes for borrowers, while also reducing losses to the Enterprises, and, therefore, to taxpayers."
Freddie Mac encourages all eligible bidders to bid, including private investors, minority- and women-owned businesses, non-profits, and neighborhood advocacy funds. The deadline for qualified bidders to submit bids for the SPOs is July 28, 2015, and the deadline for bidding on the EXPO is August 18, 2015. According to Freddie Mac, the winning bidder will be determined on the basis of economics, subject to meeting the GSE's internal reserve levels.
According to Freddie Mac, advisors for the transaction are Citigroup Global Markets, Credit Suisse Securities, and The Williams Capital Group, an MWOB.
Freddie Mac completed its first auction of an EXPO [7] in June when it sold 157 deeply delinquent loans for a total of $31 million in UPB. The winning bidder was Corona Asset Management XII. EXPOs differ from Freddie Mac's SPOs in that the loans include smaller pool sizes and a longer marketing period. Freddie Mac is targeting smaller investors with its EXPO auctions, which are intended to give these investors extra time to secure funding to participate in the NPL sales.
Freddie Mac's last SPO NPL transaction took place in late May. That SPO NPL transaction was Freddie Mac's third of 2015 and fourth overall since the first sale occurred in July 2014 [8]. The four NPL transactions have totaled approximately $2.17 billion in UPB.