Fannie Mae to Securitize Reperforming Loans

Fannie Mae yesterday said it plans to begin securitizing reperforming loans held on the company’s balance sheet later this year.   

The announcement (http://www.fanniemae.com/portal/funding-the-market/mbs/news/2016/announcement-042516.html) involves mortgages on which the borrower had been previously delinquent and subsequently became current on the mortgage either with or without using a mortgage modification plan.  

Over time, said Fannie Mae Vice President of Retained Portfolio Asset Management Bob Ives, Fannie Mae may elect to sell these mortgage-backed securities to investors, reducing the size of the company’s retained mortgage portfolio.

“With these securitizations we’ll have more flexibility to manage our risk and reduce the size of our portfolio,” Ives said. “Over the long run, these securitizations can benefit investors, Fannie Mae and taxpayers.”   Ives said securitization of reperforming loans is expected to begin in the second half of 2016. Potential sales of these securities will be contingent on market conditions and investor interest.   

In support of the program, Fannie Mae said it would enhance its loan-level disclosures for this loan population and update its PoolTalk Glossary to provide continued transparency to investors. The loan level disclosure file layout will contain more than 30 additional attributes for RPLs, including updated credit scores at issuance, delinquency status and modification details. Fannie Mae will provide rounded unpaid principal balances for RPLs along with this enhanced disclosure.  

Additionally, Fannie Mae will create 11 new prefixes related to the following RPL populations: Non-modified Loans (R series), Modified Loans (I series) and Modified Loans with a Step Rate (U series). These prefixes will not be TBA-eligible.