Freddie Mac and Fannie Mae Non-Performing Loans


Freddie Mac and Fannie Mae have strengthened their efforts to sell their high number of delinquent, non-performing loans (NPLs). From helping the taxpayer to providing opportunities for minority- and women-owned businesses, the reasons for the newfound auction fervor are several.

Fannie Mae began advertising a bulk NPL sale of $788 million in unpaid principal balance (UPB) last month and sold the sale’s two larger pools, totaling $765 million in UPB, to Lone Star (LSF9 Mortgage Holdings) last week.

Aside from these two large pools, the NPL sale also features a smaller Community Impact Pool comprised of 75 loans worth $11 million in UPB. This more modest pool is intended to promote minority- and women-owned business participation. The bidding deadline is tomorrow August 25.

Joy Cianci, Fannie Mae’s Senior Vice President for Credit Portfolio Management, stated that the objectives of their non-performing loan sales are to afford borrowers options for foreclosure prevention, clean up Fannie Mae’s profile and create opportunities for a diverse group of investors.

Continuing with their prolific sale activity, Freddie Mac announced a bundle of NPLs totaling $1.2 billion UPB last Thursday, the largest transaction of its kind to date. With a bidding deadline of September 9, the sale is projected to finalize in October.

As articulated on Freddie Mac’s blog, the goals of their NPL sales program are:

  • Help reduce less liquid assets via economically sensible transactions
  • Encourage broad investor participation
  • Consider borrower outcomes, neighborhood stability and the market
  • Provide a well-controlled and transparent process

Bidders interested in either auction must be pre-approved to participate in NPL auctions and satisfy the enhanced guidelines for NPL sales set forth by the FHFA on March 2. As these delinquent loans sell, the consumer and market will continue to benefit, and small businesses will continue having excellent opportunities to invest and grow.

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