Freddie Mac opens bidding on $420M nonperforming loan sale

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Freddie Mac is now accepting bids on $420 million in nonperforming loans, its first NPL sale of 2018.

The NPLs are currently serviced by Shellpoint Mortgage Servicing and are marketed through four pools; three standard pool offerings, which are likely to be large and geographically diverse, and one extended timeline pool offering to target smaller investors, including nonprofits or women-owned businesses.

For the SPO pools, bids are due on March 13, and for the EXPO pool, bids are due March 27, with sales expected to settle in May.

NPL sales are an important tool for Freddie to manage credit losses on its delinquent loan portfolio. The company's single-family delinquency rate increased from 95 basis points in November to 108 in December, with the multifamily delinquency rate remaining flat at 2 basis points.

Freddie Mac and Fannie Mae previously faced scrutiny from housing advocates on their practice of selling nonperforming loans to the highest bidders, typically well-capitalized investment firms and hedge funds. In 2016, community and housing groups called on the Federal Housing Finance Agency, which oversees the government-sponsored enterprises, to instead offer nonprofits and community development financial institutions a chance at the loans.

Through June 2017, Fannie Mae and Freddie Mac sold 82,359 NPLs, representing a total unpaid principal balance of $16 billion. The NPLs sold by the GSEs had an average loan-to-value ratio of 97%, and an average delinquency of 3.3 years.

NPLs in New Jersey, New York and Florida made up almost half, or 47%, of NPLs sold by Fannie and Freddie.

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Servicing Mortgage defaults Loss mitigation GSEs Secondary market Freddie Mac Fannie Mae