WASHINGTON — Two senior GOP lawmakers are warning regulators against preferential treatment for housing advocates and nonprofits in sales of nonperforming, government-guaranteed mortgages.
In a letter, House Financial Services Committee Chairman Jeb Hensarling, R-Texas, and Senate Banking Committee Chairman Richard Shelby, R-Ala., claim the Federal Housing Finance Agency and the Federal Housing Administration have a duty to maximize recoveries on defaulted mortgages.
"We urge you to reject any calls to convert your NPL sales programs into a means to award some with preferential treatment through special first-look listings, competition-free closed bidding, below-market pricing discounts and or a prioritization of organizations' mission at the expense of taxpayers," the two chairmen said in the joint March 21 letter.
They said maximizing loss recoveries "is especially paramount in light of the recent taxpayer bailout of the Federal Housing Administration and the almost $200 billion in taxpayer expenditures needed to prevent the collapse of the GSEs."
The chairmen said it is inappropriate to offer discounts on sales of Fannie Mae, Freddie Mac and FHA nonperforming loans at a "time when the country faces enormous fiscal challenges" and "crushing debt."
Fannie Mae sold 10,000 nonperforming single family loans in 2015 totaling $2.1 billion, while Freddie sold $2.9 billion in nonperforming loans. The FHA sold 13,120 nonperforming loans in fiscal year 2015 with an unpaid principal balance of $2.34 billion.
FHA launched its NPL sale program in 2010 and started to carve out targeted pools for nonprofits and community organizations in 2012.
Fannie completed three nonperforming loan sales in 2015. "Our second nonperforming loan sale transaction included a community impact pool of nonperforming loans with an unpaid principal balance of approximately $5 million that was specifically structured to attract diverse participation by nonprofits, small investor and minority — and women-owned businesses," Fannie says in its 2015 annual report.
In the joint letter, the chairmen point out that housing advocates want to convert the NPL sales into "community development conduits where certain approved buyers receive steep discounts on properties and taxpayers are left holding the bag."
A Department of Housing and Urban Development spokesman said FHA would not comment on the NPL sales until the agency responds to the committee chairmen.
FHFA also declined to comment. "We have received the senators' letter and will respond soon," FHFA said in a statement.