The Federal Housing Administration has agreed to sell 5,300 defaulted single-family loans to investors who are paying $368 million, or 39% of the unpaid principal balance.
The agency is in the process of settling terms with five investors who first placed their bids in September. In total, six loan pools were offered.
The broker price opinion on the properties is $698 million. The original UPB was $948.8 million.
One of the winning bidders, Bayview Acquisitions LLC of Coral Gables, Fla., paid $60.5 million for 908 loans with an unpaid principal balance of $173 million.
FHA’s next nonperforming note sale is slated for late February or March. FHA is expected to issue the offering announcement “very shortly,” a HUD spokesman said.
Under the terms of the sale, the loans are no longer government insured and the bidders cannot foreclose for at least six months. This limitation is designed to give servicers enough time to modify or refinance notes, allowing borrowers one last chance to save their home.
FHA has conducted several note sales since 2010 ranging in size from $16 million to $163 million. The winning bidders generally paid 30% to 40% of UPB.
FHA also auctioned off 4,100 nonperforming loans in September to 10 nonprofit and community-based organizations. These buyers cannot foreclose on the loans for several years.
Last summer, the agency decided to expand the note sale program as a way to reduce the holding costs and losses on FHA-insured loans where the servicer has exhausted all loss mitigation options and initiated foreclosure proceedings.
FHA wants to conduct investor and neighborhood stabilization sales each quarter to dispose of 40,000 nonperforming loans by the end of September.
FHA’s auditors estimate the sales will reduce the loss severity on the loans and increase the economic value of the FHA mortgage insurance fund by $1 billion in fiscal year 2013, which ends Sept. 30.