The loans, which are three years delinquent on average, have an aggregate unpaid principal balance (UPB) of $591 million, according to Freddie Mac. Given the length of time the loans have been delinquent, the borrowers have likely either been previously evaluated for or are in various stages of loss mitigation or other foreclosure alternatives, or actually in foreclosure.
About 28 percent of the aggregate pool balance consisted of previously modified mortgages that subsequently became delinquent, according to Freddie Mac. The transaction is part of Freddie Mac’s Standard Pool Offerings (SPOs) and is expected to settle sometime in mid-September.
Investors had the flexibility to bid on one or more of the three separate pools of mortgage loans offered, or they could bid on the aggregate total of all three pools. Pool number 3 was comprised of loans with LTV ratios of less than 50 percent of the property value, based on broker price opinions. Below is a summary of the pools of loans for sale and the winning bidders, as well as the cover bid prices (second highest bids).
All bidders must comply with the Federal Housing Finance Agency (FHFA)’s enhanced requirements for NPL sales announced on March 2, which include approval by and good standing with government housing agencies (Freddie Mac, Fannie Mae, Ginnie Mae, and the Federal Housing Administration); evaluating borrowers for eligibility in the government’s Home Affordable Modification Program (HAMP); and applying a “waterfall” of resolution tactics before resorting to foreclosure.
Freddie Mac began marketing this transaction on July 8 through its advisors, Citigroup Global Markets Inc., Credit Suisse Securities and The Williams Capital Group, L.P., an MWOB to non-profits, neighborhood advocacy funds, and private investors active in the NPL market.
FHFA, Freddie Mac’s conservator, stated in its 2014 Report to Congress released in June that “FHFA’s expectation is that the sale of seriously delinquent loans through non-performing loan sales will result in more favorable outcomes for borrowers, while also reducing losses to the Enterprises, and, therefore, to taxpayers.”
This transaction was Freddie Mac’s fourth SPO NPL transaction of 2015 and fifth overall since July 2014. The previous four NPL transactions totaled approximately $2.17 billion in UPB.