Freddie Mac puts $1.6bn of non-performing loans up for sale

The US national mortgage guarantor has launched its first NPL sale of the year, stepping up the bad loan disposals that amount to more than $5 billion since mid-2014.

Freddie Mac has put $1.6 billion of non-performing loans (NPL) up for sale, its first disposal of the year so far as the national mortgage guarantor accelerates the disposal of legacy residential assets.

The NPLs are being marketed for sale in seven separate portfolios, five of which are geographically diversified portfolios, known as Standard Pool Offerings (SPOs). The remaining two portfolios are geographically concentrated Extended Timeline Pool Offerings (EXPOs), which are designed to appeal to smaller investors, including non-profit organisations, as well as minority and women-owned businesses.

All bidders must be pre-approved by Freddie Mac in order to access confidential data and bid on the respective portfolios. The winning parties will be decided on the basis of their bids, provided they meet the lenders internally-set reserve levels. Bidders must also have approved loan servicers in place.

Bids on the SPOs are due on 26 February, and on 8 March for the EXPO offerings. The sales are expected to complete in the second quarter.

Freddie Mac, which guarantees $1.7 trillion in assets, auctioned almost $3.1 billion of assets in the second half of 2015, compared with $1.6 billion in the first half, and just $659 million in the second half of 2014. The step-up in sales came after the Federal Housing Finance Agency, which regulates Freddie Mac and Fannie Mae, called on the companies to reduce the number of so-called delinquent loans they hold – loans that have often not been paid for three years or longer.

In a recent $1.1 billion sale of more than 5,300 delinquent mortgages, for the best assets with a loan-to-value ratio of 72 percent (based on broker price opinions), Freddie Mac disclosed that the second-highest bid was in the high 80s on the dollar. For the poorest assets with a loan-to-value ratio of 134 percent, the runner-up bid was in the mid-50s.

The latest sale process is being handled by Wells Fargo, Credit Suisse and The Williams Capital Group. The loans are currently being serviced by Nationstar Mortgage.