Investments Servicing

Freddie Mac sells off $1 billion in NPLs to familiar private investors

Frequent buyers among winning bidders in latest non-performing loan auction

Past due foreclosure home

Freddie Mac announced Wednesday that it is selling $1 billion in non-performing loans off its books to a familiar group of private investors.

Among the winning bidders in the NPL auction are Pretium Mortgage Credit Partners I Loan Acquisition, Upland Mortgage Acquisition Company II, and Rushmore Loan Management Services, all of which previously purchased NPL pools from either Fannie Mae or Freddie Mac.

The sale, which Freddie Mac initially announced in September, is the first multi-servicer NPL sale for Freddie Mac. Either Wells Fargo or Ditech Financial is currently servicing the loans in the four pools that make up this NPL sale.

Previously, Freddie Mac’s NPL sales were on pools of loans from the same servicer.

According to Freddie Mac, the loans in this sale have been delinquent for over two years, on average.

“Given the deep delinquency status of the loans, the borrowers have likely been evaluated previously for or are already in various stages of loss mitigation, including modification or other alternatives to foreclosure, or are in foreclosure,” Freddie Mac said.

Mortgages that were previously modified and subsequently became delinquent make up nearly half (47.5%) of the total pool balance.

The loans carry an average loan-to-value ratio of approximately 86%, based on Broker Price Opinion, Freddie Mac said.

The loans in this sale were divided up into four separate pools.

The buyer for Pool #1 and Pool #2 is Pretium Mortgage Credit Partners I Loan Acquisition, which bought 1,345 non-performing loans that carried an aggregate unpaid principal balance of $266,947,532 from Fannie Mae in February.

Pretium also bought three pools of non-performing loans in December 2015 from Freddie Mac. Those loans carried an unpaid balance of $657.8 million.

In October 2015, Pretium was the winning bidder for one pool in a similar NPL sale. That pool carried a total unpaid principal balance of $209.4 million on 1,180 loans.

And in September 2015, Pretium was the winning bidder for another NPL pool, which carried an unpaid principal balance of $158.1 million on 700 loans.

In this new sale, Pretium bought the first two pools, which total $512.7 million in unpaid principal balance, one of which could be the youngest pool of NPLs sold by Freddie Mac since it began selling off NPLs in 2014.

Pool #1 contains 1,813 loans and carries an unpaid principal balance of $292.7 million. The loans in Pool #1 have a collateralized loan-to-value ratio of less than 90%, and a BPO CLTV of 71%. The loans in Pool #1 are 29 months delinquent, on average, and carry an average loan balance of $161,500 per loan.

Pool #2 contains 1,283 loans and carries an unpaid principal balance of $220 million. The loans in Pool #2 have a collateralized loan-to-value ratio of less than 90%, and a BPO CLTV of 70%. The loans also carry an average loan balance of $171,500 per loan.

Interestingly, the loans in Pool #2 are 21 months delinquent, on average. According to HousingWire research, that’s the youngest pool of loans to be sold by Freddie Mac so far.

Previously, the youngest pool of loans sold by Freddie Mac carried an average delinquency of 24 months.

So does this mean that Freddie Mac is going to start including younger loans in its NPL sales?

When asked by HousingWire if the relative youth of the loans in Pool #2 could be a harbinger of things to come, a spokesperson for Freddie Mac said that the youth of these loans is more a function of multiple NPL sales coming from the same servicer, not a change in strategy or a signal of Freddie’s plans moving forward.

Basically, the older NPLs get pooled and sold first, then younger loans after that.

According to the spokesperson, the cutoff point for a loan to make it into an NPL sale is a delinquency of at least 12 months, so this sale is not outside Freddie Mac’s parameters for a NPL sale.

The buyer of Pool #3 is Upland Mortgage Acquisition Company II, which purchased 629 NPLs with an unpaid principal balance of $189.7 million from Freddie Mac earlier this year.

Pool #3 contains 1,113 loans and carries an unpaid principal balance of $227.2 million. The loans in Pool #3 have a collateralized loan-to-value ratio of greater than or equal to 90% and less than 110%, and a BPO CLTV of 99%.

The loans in Pool #3 are 28 months delinquent, on average, and carry an average loan balance of $204,200 per loan.

The buyer of Pool #4 is Rushmore Loan Management Services, which purchased two pools of NPLs from Freddie Mac earlier this year. Those pools total $538.9 million in unpaid principal balance.

In this sale, Pool #4 contains 1,155 loans and carries an unpaid principal balance of $222.8 million. The loans in Pool #4 have a collateralized loan-to-value ratio of greater than or equal to 110%, and a BPO CLTV of 136%.

The loans in Pool #4 are 29 months delinquent, on average, and carry an average loan balance of $192,900 per loan.

According to Freddie Mac, all four pools were sold at a weighted average price in the mid-70s as a percent of the total unpaid principal balance, meaning the pools were purchased, on average, for 70 cents on the dollar.

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