The Federal Housing Finance Agency (FHFA) issued its first report on the sales of non-performing loans by the government-sponsored enterprises—Fannie Mae and Freddie Mac. As articulated by FHFA Director Melvin Watt in a recent release, “This report reflects the first available results since the Enterprises started to sell NPLs [non-performing loans] and since we put in place enhanced requirements for servicing these loans.” According to Watt, the report demonstrates the FHFA’s “commitment to transparency” as the agency works to “achieve more favorable outcomes for borrowers and for the Enterprises by providing alternatives to foreclosure whenever possible.”
As observed by the FHFA’s “Enterprise Non-Performance Loan Sales Report,” non-performing loan sales reduce the number of severely delinquent loans in the Enterprises’ portfolios. Moreover, the rules are subject to FHFA requirements that “encourage NPL buyers to prioritize outcomes for borrowers other than foreclosure.”
Report highlights. The FHFA’s report reviews available data on NPL sales by Fannie Mae and Freddie Mac through May 31, 2016, and preliminary outcomes for borrowers through Dec. 31, 2015. Among other things, the FHFA’s first report on the sales of NPLs by the Enterprises indicates that:
- the Enterprises have sold over 41,600 NPLs with a total unpaid principal balance of $8.5 billion through the end of May 2016;
- New Jersey, Florida, and New York accounted for nearly half of the NPLs sold;
- the NPLs had an average delinquency of 3.4 years and an average current loan-to-value ratio of 98 percent;
- a nonprofit organization, Community Loan Fund of New Jersey, was the “winning bidder on five of six small, geographically concentrated pools” sold by Fannie Mae and Freddie Mac through May 2016 and is a service provider for the sixth pool;
- NPLs where the home is occupied by the borrower had a higher rate of foreclosure avoidance than for vacant properties;
- generally, the FHFA believes that foreclosure of vacant homes can “improve neighborhood stability and reduce blight” as the homes are sold or rented to new occupants; and
- only 24 percent of the 8,849 NPLs have been resolved to date, with half of those being resolved without foreclosure and half being resolved through foreclosure.
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