Freddie Mac completed its first bulk sale of deeply delinquent single-family residential mortgage loans from its mortgage investment portfolio in two months when it sold via auction 5,311 deeply delinquent non-performing loans (NPLs) serviced by Wells Fargo Bank, according to an announcement by Freddie Mac on Tuesday.
The loans sold in five pools with an aggregate unpaid principal balance of $1.1 billion, making this Freddie Mac’s second bulk NPL sale worth more than $1 billion and the first since mid-September. This transaction ties that September sales for the largest Freddie Mac bulk sale of NPLs—both transactions were worth $1.1 billion. Overall, it was Freddie Mac’s eighth Standard Pool Offering (SPO) sold since the first sale closed in August 2014.
The transaction was completed on December 4 after four weeks of bidding, and it is expected to settle in February 2016. The loans are three years delinquent on average. Given the deep delinquency of the loans, Freddie Mac said the borrowers have either previously been evaluated for or are in some stage of the loss mitigation process that includes a foreclosure alternative such as a modification. Some of the loans are in the foreclosure process. Nearly one-third of the aggregate pool balance (32 percent) consists of mortgages that were previously modified and subsequently became delinquent.
According to Freddie Mac, the aggregate pool is geographically diverse and has a loan-to-value (LTV) ratio of approximately 91 percent.
The winning bidders and cover bids (second highest bids) for each of the five pools are as follows:
Freddie Mac began marketing the transaction on November 9 to potential bidders which include minority and women-owned businesses (MWOBs), non-profits, neighborhood advocacy funds, and private investors who are active in the NPL Market. Freddie Mac’s advisers on the transaction were Wells Fargo Securities, JPMorgan Securities, and First Financial Network, a woman-owned business.
The FHFA, Freddie Mac's conservator, requires all bidders to comply with the Agency's enhanced requirements for NPL sales 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.