On Wednesday, the mortgage-finance company, Fannie Mae, announced details on its first non-performing loans sale, The Wall Street Journal reported. The outlet stated that it is the company's way to help borrowers behind these loans to "stay in their homes."
"These transactions are intended to reduce the number of seriously delinquent loans that Fannie Mae owns, to help stabilize neighborhoods, and to offer borrowers access to additional foreclosure prevention options," Joy Cianci, Fannie Mae's senior vice president for credit portfolio management told Housing Wire last week.
Now, Fannie Mae said that the company's first auction would have around 3,200 mortgages totalling $786M in unpaid principal balance, and after that, the company would auction off such loans in regular periods, says The Wall Street Journal.
Housing Wire noted that this first auction will still be offered in two pools: The first one would be having around $180 million in unpaid principal balance and the second one would be carrying the bigger chunk of $606 million unpaid principal balance.
The Bank of America Merrill Lynch will also market the sale while Credit Suisse and The Williams Capital Group act as advisors, the mortgage finance-company said.
Fannie Mae also explained that the pools of NPL will be available for qualified bidders, and that the bids for these NPL are due on May 6, with closing expected to happen before the start of third quarter this year.
"We plan to build these sales into a programmatic offering, and look forward to working with a diverse range of potential buyers over time, including smaller investors, nonprofit organizations and minority- and women-owned businesses," Cianci added.
Meanwhile, Freddie Mac, also a government-sponsored enterprise mortgage-finance company, had already sold delinquent loans via two transactions since last year, according to CoStar. The first one was reportedly done in Aug last year, consisting of $596 million of unpaid principal balance and the second one, this February 2015, carrying $392 million of unpaid principal balance.
CoStar added that sale of such NPLs by Fannie Mae and Freddie Mac must meet the directive of the Federal Housing Finance Agency, the companies' regulator and conservator, including the new requirements such as:
- Wining bidders' servicers must "include evaluating borrowers for eligibility in FHFA's Home Affordable Modification Program (HAMP)." Another one is for borrower's loan modification to not "have an upfront fee" or "need a prepayment of any amount of mortgage debt." FHFA stressed that "foreclosure must be the last resort option." The private servicers are further encouraged by the conservator to sell foreclosed properties to individuals who will make these properties as primary residence, or to sell these properties to non-profit organization.
"FHFA expects that with these enhanced requirements, NPL sales by Freddie Mac and Fannie Mae will result in more favorable outcomes for borrowers and local communities, while also reducing losses to the Enterprises and, therefore, to taxpayers," said FHFA Director Melvin L. Watt, as quoted by CoStar.
