FHFA Releases Data on NPL Sales
Written By: Joel Palmer, Op-Ed Writer
Fannie Mae and Freddie Mac sold more than 117,000 non-performing loans (NPLs) with an unpaid principal balance of more than $22 billion since 2014.
These and other NPL data were recorded in the Federal Housing Finance Agency’s (FHFA) Enterprise Non-Performing Loan Sales Report released last month.
This report provides information about the enterprises' sales of NPLs and borrower outcomes post‐sale. It contains the following information:
Quantity and attributes of NPLs sold from August 1, 2014 through June 30, 2019.
Borrower outcomes as of June 30, 2019 on NPLs sold through December 31, 2018.
Borrower outcomes post‐sale compared to a benchmark of similarly delinquent enterprise NPLs that were not sold.
Pool level information and outcomes, including the buyers of the NPLs.
Findings within the report include:
NPLs sold had an average delinquency of three years and an average loan-to-value ratio of 92 percent.
Average delinquency for pools sold ranged from 1.4 to 6.2 years.
From December 31, 2015 to June 30, 2019, the number of loans one or more years delinquent held in the enterprises' portfolio decreased by 71 percent.
About 45 percent of NPLs sold originated in the states of New Jersey, New York and Florida.
NPLs on homes occupied by borrowers had a 36.6 percent foreclosure avoidance rate versus 14.9 percent for vacant properties. NPLs on vacant homes had more than double the rate of foreclosure of borrower-occupied properties (73.4 percent foreclosure versus 31.4 percent.
72 percent of NPLs sold with reportable outcomes had been resolved. Thirty percent of NPLs were resolved without foreclosure, and 42 percent were resolved through foreclosure.
Nearly 38 percent of NPLs where the servicer had established contact with the borrower, co‐borrower, or advisor had a non‐foreclosure outcome, compared with 17.4 percent of loans in which the servicer was unable to establish contact.
NPLs with periods of delinquency of less than two years had the highest percentage of foreclosure avoidance. The rate was 34.9 percent for delinquencies under two years, 28.2 percent for 2‐5 years delinquent and 20 percent for loans 5+ years delinquent.
The sale of NPLs, which are generally a year or more delinquent, reduces the number of delinquent loans in the enterprises' portfolios and transfers credit risk to the private sector.
Fannie sells NPLs through a National Pool Offering, while Freddie sells them through a Standard Pool Offering. Each enterprise also offers pools structured to attract participation by nonprofits, small investors, and minority‐ and women‐owned businesses.
FHFA and Fannie and Freddie impose requirements on NPL buyers designed to achieve more favorable outcomes for borrowers than foreclosure.
About the Author
As an NAMP® Opinion Editorial Contributor, Joel Palmer is a freelance writer who spent 10 years as a business and financial reporter and another 10 years in marketing for the insurance and financial services industries. He regularly writes about the mortgage industry, as well as residential and commercial real estate, investments, and retirement income planning. He has also ghostwritten books on starting a business, marketing, and retirement income planning.
