Freddie Mac announced a $628 million nonperforming loan sale Tuesday, setting aside two of the four pools involved for community investors in line with
The government-sponsored enterprise, one of two that buys a significant number of mortgages originated in the United States, said a more specialized portion of the offering will be earmarked for nonprofit, minority, women, disabled, LGBTQ+, and veteran investors.
Freddie does this through its Extended Timeline Pool program, which since 2015 has offered investors a longer marketing period and smaller batches of loans for sale to address challenges more moderate-sized buyers have had taking on large distressed mortgage portfolios. The bid deadline for these pools is Oct. 19, as compared to Sept. 21 for standard pools up for sale.
The GSE's advisors on the overall sale include First Financial Network, a woman-owned business, and Wells Fargo Securities, an affiliate of a major bank.
The latest sale, which is relatively large for an NPL offering, follows concern by some Democrats earlier this year that this type of secondary market activity and reperforming loan sales lead to the removal of too many distressed single-family properties from owner-occupied inventory. They say it's a concern that's particularly pressing at a time when
"A large share of the loans sold through nonperforming loan sales not only lead to the homeowner losing their home, but to the home being lost from the homeownership market," a group of five senators said in a letter sent to the Federal Housing Finance Agency in February.
Sen. Sherrod Brown, D.-Ohio, and chair of the Senate Committee on Banking, Housing and Urban Affairs, was among the signatories of the letter. Sens. Jack Reed, D.-R.l.; Tina Smith, D.-Minn.; Ron Wyden, D.-Ore.; and Elizabeth Warren, D.-Mass.; also signed the missive.
Reed has introduced related legislation called the Preserving Homes and Communities Act, but its progress has been limited at a time when bipartisan support is crucial to getting bills passed.
While some Democrats favor earmarking some distressed loans for community, nonprofit and minority investors,
The FHFA subsequently released a fact sheet about the program in June stating that roughly 60% of the NPLs have gone to non-owners. But it also enumerated some servicing requirements and other steps it has taken to preserve owner occupied units.
The agency, which oversees Fannie and Freddie, in its fact sheet cited figures from its NPL Sales Report indicating that as of June 2022, 36% of around 63,000 properties went to owner-occupants or nonprofits,
Mortgage servicers that work with NPL buyers and their successors must report loan resolution and borrower outcomes for four years after a sale and explore foreclosure alternatives with borrowers. Otherwise, they must complete a foreclosure, sell or donate the loan.
Specialized Loan Servicing and companies affiliated with Credit Suisse, NewRez and Nationstar, respectively, have been handling the loans in the current NPL sale. (Nationstar has been rebranded as Mr. Cooper but its original name persists in some official records.)
