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Fannie Mae to sell non-performing loans

Joins Freddie Mac in meeting FHFA directive

Fannie Mae is set to join government-sponsored enterprise counterpart Freddie Mac in selling off pools of non-performing loans.

Last week, Freddie Mac completed its largest ever sale of seriously delinquent loans to GCAT Management Services, selling off 5,398 deeply delinquent non-performing loans that carried an aggregate unpaid principal balance of $985 million.

At the beginning of March, the Federal Housing Finance Agency outlined the new requirements for sales of NPLs by Freddie Mac and Fannie Mae to ensure the loans are transferred to capable mortgage servicers.

Now, Fannie Mae is joining Freddie in offering NPL pools to “interested” buyers.

Fannie expects to market its first NPL transaction in the near future, and as those transactions increase, hopes that some of them will be targeted for purchase by nonprofit organizations, smaller investors and minority- and women-owned businesses.

“These transactions are intended to reduce the number of seriously delinquent loans that Fannie Mae owns, to help stabilize neighborhoods, and to offer borrowers access to additional foreclosure prevention options,” said Joy Cianci, Fannie Mae’s senior vice president for credit portfolio management.

“Our goal is to market these loans to a diverse range of buyers,” Cianci added. “We look forward to building these sales into a regular, programmatic offering to the market.”

While Fannie is still in the planning stages of its first NPL offering, Freddie recently disclosed that it had already sold severely delinquent loans through two transactions in the past six months — one in August 2014 covering $596 million of unpaid principal balance, and the other on Feb. 5, 2015 covering $392 million of UPB.

The FHFA’s new standards for NPL sales were based on those two pilot sales.

"FHFA expects that with these enhanced requirements, NPL sales by Freddie Mac and Fannie Mae will result in more favorable outcomes for borrowers and local communities, while also reducing losses to the Enterprises and, therefore, to taxpayers," FHFA Director Melvin Watt said last month. "Under the requirements announced, servicers must consider borrowers for a range of alternatives to foreclosure."

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