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Freddie Sells $659M of Debt in First Soured-Mortgage Deal

AUG 4, 2014 11:53am ET
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Freddie Mac, the government-backed mortgage giant, sold $659 million of "deeply" delinquent home loans in its first offering of such debt.

Twenty-two potential buyers participated in the auction, which was conducted by affiliates of Bank of America Corp., the McLean, Va.-based company said. It didn't disclose the price, and won't be naming the buyer, according to Tom Fitzgerald, a spokesman.

The company, which "selected the winning bidder on the basis of economics," will "continue to look for opportunities to reduce exposure to less-liquid assets in its investment portfolio," it said in the statement.

Freddie Mac and rival Fannie Mae have been stuck with a bevy of soured mortgages, bought out of bonds they guaranteed, after a surge in defaults amid the U.S. housing crisis. The companies, which were seized by the government in 2008, previously sought to recoup value themselves by modifying the loans or selling homes after foreclosures.

The loan sale comes as investment firms such as Lone Star Funds, One William Street Capital Management LP and Ellington Management Group LLC seek to gobble up bad home loans as the housing market recovers, pushing up prices.

"We’re not going to do transactions that are wealth transfers to private investors," Freddie Mac Chief Executive Officer Donald Layton said on a conference call with reporters in May.

The company, which owns or backs $1.9 trillion of housing debt, held $169.1 billion of loans on June 30, according to monthly disclosures. It's also begun repackaging reperforming and modified mortgages into new bonds that it guarantees.

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