GSEs Sell 1,700 Non-Performing Loans in First Half of 2018

The Federal Housing Finance Agency reported Fannie Mae and Freddie Mac sold 1,740 non-performing loans in the first half of 2018.

The pace was substantially slower than in all of 2017, when 18,419 NPLs were sold. Since 2014, the government-sponsored enterprises have sold 98,061 NPLs with a total unpaid principal balance of $18.7 billion.

The FHFA semiannual report noted sale of NPLs reduces the number of delinquent loans in the Enterprises’ portfolios and transfers credit risk to the private sector. FHFA and the Enterprises impose requirements on NPL buyers designed to achieve more favorable outcomes for borrowers than foreclosure.

FHFA said NPLs sold through the first half of 2018 had an average delinquency of 3.1 years and an average current loan-to-value ratio of 95 percent (not including capitalized arrearages). New Jersey, New York, and Florida accounted for 46 percent of NPLs sold. These three states also accounted for 47 percent of the Enterprises’ loans that were one year or more delinquent as of December 31, 2014, prior to the start of NPL programmatic sales in 2015.

From December 31, 2015 to June 30, 2018 the number of loans one or more years delinquent held in the Enterprises’ portfolio decreased by 61 percent.

FHFA also reported borrower outcomes are as of June 30 and are based on the 88,200 NPLs settled by December 31, 2017. These outcomes reflect the following:

–As of June 30, 62 percent of these NPLs had been resolved.

–Compared to a benchmark of similarly-delinquent Enterprise NPLs that were not sold, foreclosures avoided for sold NPLs were higher than the benchmark.

–NPLs on homes occupied by borrowers had the highest rate of foreclosure avoidance outcomes (28.2 percent foreclosure avoided versus 12.7 percent for vacant properties).

–NPLs on vacant homes had a much higher rate of foreclosure, more than double the foreclosure rate of borrower-occupied properties (65.9 percent foreclosure versus 28.6 percent for borrower occupied properties).

–Twenty percent of the permanent modifications of NPLs incorporated arrearage and/or principal forgiveness. Average forgiveness earned per loan to date was $55,280 (with the potential to earn an average forgiveness of $77,491).

The report can be found at