Fannie Mae sells first small NPL pool to private equity firm

First Community Impact pool not sold to a non-profit

Fannie Mae announced Thursday that it selected a winning bidder for its fourth sale of non-performing loans as part of its “Community Impact Pool” program, which consists of smaller pools of non-performing loans and is designed to attract participation by non-profits, small investors and minority- and women-owned businesses.

But for the first time since it began targeting smaller investors, Fannie Mae selected a private equity firm as the winner of the auction.

In each of the previous three “Community Impact Pool” sales, Fannie Mae sold the smaller pools of loans to New Jersey Community Capital or one of its affiliates. New Jersey Community Capital is a non-profit community development financial institution.

In the fourth Community Impact NPL sale, Fannie Mae selected Corona Asset Management XVIII, LLC as the winning bidder.

The pool of loans Corona Asset Management XVIII is set to buy consists of 80 loans secured by properties located in the Miami, Florida area with an unpaid principal balance of approximately $18.5 million. 

As Fannie Mae notes, the loan pool consists of 80 loans that carry an aggregate unpaid principal balance of $18,467,573. The average loan size of $230,845 and the weighted average note rate is 4.86%. The loans’ weighted average delinquency is 38 months and the loans have a weighted average broker's price opinion loan-to-value ratio of 98%.

Fannie Mae said the cover bid price, which the second highest bid, is 62.4% of the loans’ unpaid principal balance, or 60.9% of the broker's price opinion.

Fannie Mae began marketing this Community Impact Pool to potential bidders on June 16, 2016, along with Bank of America Merrill Lynch and CastleOak Securities.

“We continue to strive to help struggling homeowners and neighborhoods recover,” Joy Cianci, Fannie Mae’s senior vice president of single-family credit portfolio management, said in June. “Today’s announcement of our non-performing loan sale furthers this commitment by expanding the opportunities available for borrowers to avoid foreclosure.”

Fannie Mae noted in its announcement that these loans are subject to the new rules for non-performing loan sales announced by the Federal Housing Finance Agency in April.

Among those rules are that buyers of purchase non-performing loans from Fannie Mae or Freddie Mac must now evaluate certain underwater borrowers for modifications that include principal and/or arrearage forgiveness.

Buyers are also forbidden from “walking away” from vacant homes, and the new rules establish more specific proprietary loan modification standards for NPL buyers.

According to the FHFA, these new rules are designed to minimize foreclosures, help mitigate the potential for neighborhood blight and decay, and help improve loan modification success rates.

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