GSEs Sold $14.2 Billion in Non-Performing Loans in 2016

The Federal Housing Finance Agency released its third report on sales of non-performing loans by Fannie Mae and Freddie Mac, noting they sold 72,502 NPLs with an unpaid principal balance of $14.2 billion in 2016.

The report (https://www.fhfa.gov/AboutUs/Reports/ReportDocuments/Dec2016_NPL_Sales_Report.pdf) said NPLs sold had an average delinquency of 3.4 years and an average current loan-to-value ratio of 97 percent. New Jersey, Florida and New York accounted for nearly half (48 percent) of NPLs sold. These three states also accounted for 47 percent of GSE loans that were one year or more delinquent as of December 31, 2014.

A nonprofit organization, Community Loan Fund of New Jersey, along with its affiliate, New Jersey Community Capital, was the winning bidder on nine of 11 small, geographically concentrated NPL pools sold by December 31, 2016, and CLFNJ is a service provider for the 10th and 11th pools.

FHFA emphasized sale of NPLs reduces the number of severely delinquent loans in the Enterprises’ portfolios and that it, Fannie Mae and Freddie Mac impose requirements on NPL buyers to encourage prioritization of outcomes for borrowers other than foreclosure.

The report said borrower outcomes are based on 45,446 NPLs settled by June 30, 2016 and reported through December 31, 2016. These outcomes reflect the following:

–NPLs where the home was occupied by the borrower had the highest rate of foreclosure avoidance outcomes (18.8 percent foreclosure avoided versus 10.1 percent for vacant properties).
–NPLs where the property is vacant had a much higher rate of foreclosure, nearly double the foreclosure rate of borrower-occupied properties (38.5 percent foreclosure versus 16.6 percent for borrower occupied properties). Foreclosure outcomes for vacant homes typically improve neighborhood stability and reduce blight as the homes are sold or rented to new occupants.
–Compared to a benchmark of similarly delinquent NPLs not sold, foreclosures avoided for sold NPLs were higher than the benchmark. ThirtyÔÇÉthree percent of NPLs that have been with the new servicers the longest (1,737 NPLs for 20 months) avoided foreclosure, compared to 23 percent of the benchmark NPLs.
–Eleven percent of the permanent modifications provided arrearage and/or principal forgiveness. The average forgiveness earned per loan was $35,385, with the potential to earn an average forgiveness of $73,695 in total.