DebtX pushes forward with $5B HUD nonperforming note sale

Three bid dates slated for later this year

Loan sale advisor DebtX is promoting its largest sale of single-family non-performing Department of Housing and Urban Development loans, with a $5 billion pipeline up for grabs and bids dates slated for late October and November.

This is certainly not the loan sale advisor’s first foray into selling HUD notes, but it’s the largest, says DebtX CEO Kingsley Greenland.

Greenland notes that DebtX – and its platform of due diligence and sales technology platforms – handled other HUD loan sales back in June, July and August, with those deals valued roughly at a few billion total.

But that was a culmination of multiple sales. This one, Greenland says, includes 29,000 loans valued at $5 billion, making it "the largest single-family loan sale on a public basis that I have ever seen,” Greenland pointed out when discussing the sale with HousingWire.

The mass sale of HUD nonperforming single-family loans is registered under the identification number, HUD SFLS 2014-1.

Three separate bid dates are scheduled, with DebtX taking the time to structure each sale in a manner that appeals to investors with different interests — whether it's to create rent-to-own properties, eventual asset sales or to hold onto these homes as investments.

DebtX is putting up 24,000 loans during the first two bid dates on Oct. 30 and Nov. 20.

A third sale is slated for Dec. 10, with the firm offering up 5,000 loans tied to HUD Neighborhood Stabilization Outcome pools in this final sale. The NSO pools include notes in hardest-hit housing markets, such as Atlanta, Baltimore/DC, California, Indianapolis and Las Vegas.

While the NSO pools include attractive deals, they also come with restrictions since HUD has slated some of the communities for ongoing revitalization.

Greenland says parts of the third sale come with restrictions on "how many of the loans can be foreclosed on."

To pique investor interest, Greenland points out the firm "structured a number of different pools."

There are large pools, small pools, pools linked to judicial foreclosure states and those tied to nonjudicial foreclosure jurisdictions, he explained. The key is to create diversity within the deals to meet the needs of different investors.

So how do investors feel about the chance to grab at thousands of nonperforming loans?

"Our general gauge is investors are biting at the bit," Greenland said. "This is just an enormous deal.The ability to be able to participate and get scale so quickly can be important to financial investors," he noted. Not to mention, local investors may jump in at the mere possibility of gaining access to so many nonperforming notes.

DebtX is not new to these deals. In fact, it’s been announcing sales periodically for a long time.

But the ability to market 29,000 HUD single-family notes is a huge accomplishment for the platform, Greenland suggests. "This is not a tape sale, but all 29,000 files are available online in a very efficient format," the CEO told Housingwire. He added, the files "are organized in a fashion where investors can look at what they want."

The ability to quickly conduct due diligence and bid is key, he explained.

The firm credits its technology and existing platforms for making all of this possible.

But perhaps the biggest takeaway is this: banks are finally able to get rid of nonperforming notes after being persuaded away from doing it during the robosigning crisis of 2010-2011. Most of those concerns are gone now, and the market is seeing nonperforming note sales pick up, Greenland said.

"Now it’s gearing up again, (banks) are saying I just want to put this stuff behind me," he explained.

For more information, investors should visit the DebtX website.

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