The GSE regulator is starting to notice the emergence of some rapidly growing nonbank servicers that have become Fannie Mae and Freddie Mac seller/servicers.
“Fannie Mae has begun transferring large servicing assignments to rapidly growing nonbank companies that introduce a new level of [operational] risk,” the Federal Housing Finance Agency says in its 2012 annual report to Congress.
In January,
The annual report covers GSE’s activities over the past year along with FHFA’s assessment of the credit, market, operational risks facing Fannie and Freddie.
FHFA examiners continue to express “significant” concerns about the distressed and illiquid assets—nonperforming loans, re-performing modified loans and private-label securities—the GSEs hold in portfolio.
“Distressed assets are becoming an increasingly larger proportion of Fannie Mae’s portfolio,” FHFA says in the annual report. Freddie Mac’s retained portfolio “continues to be a concern because of the illiquidity of its investments.”
A FHFA Inspector General report shows Fannie’s investment portfolio has $386.8 billion in whole loans. And 60% of those whole loans are modified or delinquent. Freddie has $232 billion in whole loans and 50% are distressed loans.
FHFA acting director Edward DeMarco has directed the GSEs to begin selling these illiquid and distressed loans.
“To address this issue and further de-risk’ the [GSEs’] portfolios in 2013, we are setting a target of selling 5% of the less liquid portion of the retained portfolios,” DeMarco said.
