The Federal Housing Finance Agency (FHFA) has released the latest report on the sale of non-performing loans (NPLs) by Fannie Mae and Freddie Mac (the Enterprises). The Enterprise Non-Performing Loan Sales Report includes information about NPLs sold through December 31, 2019 and reflects borrower outcomes on NPLs sold through June 30, 2019 and reported through December 31, 2019. The 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.
This report shows that, through December 31, 2019, the Enterprises sold 126,757 NPLs with a total unpaid principal balance (UPB) of $23.8 billion.
NPLs sold had an average delinquency of 2.9 years and an average loan-to-value ratio of 91%. The average delinquency for pools sold ranged from 1.4 years to 6.2 years.
NPLs in New Jersey, New York and Florida represented nearly half (44%) of the NPLs sold. These three states accounted for 47% of the Enterprises’ loans that were one year or more delinquent as of December 31, 2014, prior to the start of NPL program sales in 2015.
Fannie Mae sold 86,216 loans with an aggregate UPB of $15.8 billion, an average delinquency of 3.0 years, and an average LTV of 89%. Freddie Mac sold 40,541 loans with an aggregate UPB of $8.1 billion, an average delinquency of 2.9 years, and an average LTV of 98%.
The borrower outcomes in the report are based on 114,745 NPLs that were settled by June 30, 2019 and reported as of December 31, 2019. 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 vacant homes had a much higher rate of foreclosure, more than double the foreclosure rate of borrower-occupied properties (76.9% foreclosure versus 34.4% for borrower occupied properties). Foreclosures on vacant homes typically improve neighborhood stability and reduce blight as the homes are sold or rented to new occupants.