Lone Star, Neuberger buy NPLs from Fannie Mae

The two investment funds purchased more than $1.5bn in unpaid balances in deals that are projected to close on 24 August.

Lone Star Funds and Neuberger Berman have won Fannie Mae’s sixth auction of non-performing loans (NPLs), marking the second time each firm won such a bidding war.

The government-sponsored enterprise (GSE) on Thursday (14 July) announced that Lone Star and Neuberger together purchased 9,300 delinquent obligations with more than $1.5 billion in unpaid balances. Both firms acquired three pools of NPLs in sales that are expected to close on 24 August.

Lone Star scooped up 4,537 loans with $746.4 million outstanding deals, while Neuberger bought 4,721 NPLs on which $759.9 million is owed. Bank of America Merrill Lynch and Castle Oak Securities helped Fannie Mae market the loans, beginning on 16 June, in the latest sale.

Alicia Jones, a Fannie Mae spokeswoman, declined to disclose the purchase prices. Representatives for Lone Star and Neuberger could not be reached for comment.

Fannie Mae began selling NPLs regularly in April 2015 as part of a required effort to reduce the number of delinquent loans the mortgage lending financier keeps on its books. Neuberger Berman won a pool of loans in the initial auction in May 2015, when it bought 2,358 loans with $587.9 million in outstanding value. Lone Star emerged as the winner of the GSE’s second NPL sale. The Dallas-based investment firm bought 3,900 loans with $765 million in unpaid principal in August 2015.

The portfolio reduction needs were stipulated in the senior preferred stock purchase agreement that the Federal Housing Finance Agency (FHFA) reached with the US Treasury Department. The stock agreement came in September 2008 when Congress put the two GSEs into conservatorship amid the financial crisis.

The initial stock agreement required Fannie Mae to reduce its portfolio by 10 percent annually, a number that increased to 15 percent in August 2012 when the Treasury and the FHFA changed the stock agreements. The necessary reductions also apply to Freddie Mac. Together, the two GSEs must eventually have no more than $250 billion in their portfolios, a figure they should reach by 2018.

Lone Star has also purchased more than $1 billion in Freddie Mac NPLs—$822.6 million in a September 2015 auction and $201 million in a May 2015 auction. Neuberger appears to have not purchased any Freddie Mac NPLs in the past. Goldman Sachs and Pretium Partners are among other firms that have purchased both Fannie Mae and Freddie Mac NPLs.

Neuberger, a private investment manager, invests in equities, fixed income securities private equity and hedge fund portfolios. The firm was founded in 1939, and acquired by Lehman Brothers, the defunct investment bank, in 2003. In May 2008, Neuberger was spun off from Lehman, which had filed for bankruptcy by then, and is now employee owned.

 

Lone Star invests in commercial real estate lending along with corporate debt, which focuses on second lien, secured last-out, mezzanine and equity co-investments. The firm has $65 billion in assets under management.