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Fannie Closer to Launching an NPL Pilot?

JUN 13, 2012 10:14am ET
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Fannie Mae, which boasts a “credit enhanced” delinquency rate of roughly 8% on its guaranteed loans, is moving closer to launching a pilot program to dispose of some of that product, according to industry advisors familiar with the GSE’s plans.

The GSE, said one source, likely will issue a “request for proposal” sometime this summer to find a loan advisory firm to assist it.

At this point it’s unclear how much in nonperforming loans Fannie might unload.

A Fannie Mae spokesman declined to comment.

At last check the GSE held $247 billion of whole loans in its on-balance-sheet portfolio. At an 8% delinquency rate means Fannie owns roughly $20 billion in mortgages that are in arrears with most of it likely tied to alt-A loans.

Fannie has been working on the NPL pilot for close to a year, but has said nothing publicly about the matter.

Freddie Mac is working on a similar pilot, sources said, but Fannie is much further along on its program.

Firms that might bid on the loan advisor contract include Credit Suisse First Boston, Deutsche Bank, Barclays and others.

Meanwhile, NPL investors continue to complain not about a lack of auctions, but the willingness of banks to negotiate on price and actually sell their problem assets.

The nation’s megabanks are sitting on their residential and commercial NPLs, although some are currently out in the market with midsized packages.

As reported by National Mortgage News recently, Wells Fargo & Co. auctioned off $200 million in NPLs late this spring with Citigroup hitting the market with a $99 million package.

To date, both banks have declined to discuss their deals.

Late last year there was a flurry of auctions by a handful of large sellers but it’s unclear how much in product actually changed hands. As a general policy, many bank sellers will not discuss their offerings or the bids.

To date, the NPL market has turned out be a bust for investors. Several private equity and investment funds grubstaked start-ups to buy and workout troubled mortgages but few have reaped much reward.

Recently, Arch Bay Capital, an NPL investor based in Irvine, Calif., fired its top management team and is in the process of finding a new servicer, industry sources told National Mortgage News.

A year ago Kondaur Capital, another NPL firm, fired its CEO, Jon Daurio, after its backers expressed dismay at the returns the company was earning.

 

 

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