Government-sponsored enterprise (GSE) Fannie Mae (FNM) said Monday it expects to purchase from 150,000 to 200,000 delinquent loans out of single-family mortgage-backed security (MBS) trusts during March. The clarification of Fannie’s delinquent buyouts answered some industry questions about the time line of the buyouts and the scope of delinquencies among product time, according to analysis this week by Barclays Capital. This month will mark only the beginning of Fannie’s plan to buyout loans 120+ days delinquent. The GSE said in a press statement it expects to continue purchasing delinquent loans in subsequent months until the seriously delinquent loan population is “substantially reduced.” As of Dec. 31, 2009, the dollar volume of 120+ delinquencies in Fannie’s single-family MBS was about $127bn (download chart). Fannie also said it will include loans that since became 120+ days delinquent into the purchase population. Although Fannie gave no indication of maintaining buyouts at a steady pace in coming months, Barclays Capital (BarCap) researchers projected the GSE could remove about 25 to 30% of its delinquent loan pipeline each month if it continues at March’s pace. Fannie said it will give purchase priority to mandatory purchases like modified loans and 24-month delinquencies. The GSE will also give priority to loans in MBS having the highest MBS pass-through rates and loans with the highest unpaid principal balances. “The priority list suggests that in large part, Fannie Mae will first begin removing the delinquent loans for higher coupons before proceeding to clean out lower coupons,” BarCap researchers said in commentary provided to HousingWire. “Thus, we are likely to see extremely fast prints in super premiums (6.5s and 7s) in the April report, while lower coupons (5.5s and lower) display minimal accelerations. In the following months after higher coupons are purged of their delinquent loans, we will then see lower coupons have their turn.” BarCap also noted the data provided by Fannie to illustrate the total population of 120+ day delinquencies for the first time discloses delinquency rates by mortgage product. These disclosures provide investors a “clear insight” into not only the size of the pipeline to be bought out, but the relative roll rates across product types. This data also indicates Fannie delinquencies across products are “noticeably higher” than those at Freddie, BarCap researchers said. For example, overall 30-year Fannie delinquency rates appear about 20% higher than comparable Freddie rates, according to BarCap. Write to Diana Golobay. Disclosure: The author holds no relevant investment positions.
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