WASHINGTON – The Federal Housing Finance Agency reported it shed almost $29 billion in delinquent loans.
The agency released the latest report on the sale of nonperforming loans by Fannie Mae and Freddie Mac (“the Enterprises”). The Enterprise Non-Performing Loan Sales Report includes sales information about NPLs sold through Dec. 31, 2021; borrower outcomes reflect NPLs sold through June 30, 2021.
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 on NPL buyers requirements that are designed to achieve more favorable outcomes for borrowers than foreclosure.
The latest report shows that the Enterprises sold 154,972 NPLs with a total unpaid principal balance of $28.7 billion from program inception in 2014 through Dec. 31, 2021. The loans included in the NPL sales had an average delinquency of 2.8 years and an average current mark-to-market loan-to-value ratio of 86% (not including capitalized arrearages).
Mark-to-market is a method of measuring the fair value of accounts which can fluctuate over time, such as assets and liabilities; it provides a realistic estimate of a financial asset. Loan-to-value ratio is the value of a property versus the outstanding balance of the loan that was issued to buy it.
NPL Sales Highlights
The average delinquency for pools sold ranged from 1.1 years to 6.2 years.
Fannie Mae has sold 104,467 loans with an aggregate UPB of $19.0 billion, an average delinquency of 2.8 years, and an average LTV of 84%.
Freddie Mac has sold 50,505 loans with an aggregate UPB of $9.7 billion, an average delinquency of 2.7 years, and an average LTV of 90%.
NPLs in New Jersey, New York, and Florida represented 41% of the NPLs sold.
From Dec. 31, 2015, to Dec. 31, 2020, the number of loans one or more years delinquent held in the Enterprises’ portfolio decreased by more than 60%. The number of newly delinquent loans nearly tripled in 2021 amid the COVID-19 pandemic as the Enterprises implemented new loss mitigation programs.
(In response to the COVID-19 national emergency, the FHFA directed the Enterprises to implement new loss mitigation programs including: 1) COVID-19 forbearance from mortgage payments for up to 18 months and 2) flex modification for borrowers with a COVID-19 hardship that increases eligibility and payment relief by providing an interest rate reduction regardless of the borrower's equity position.)
Borrower Outcomes Highlights
The borrower outcomes in the report are based on 128,087 nonperforming loans that were settled by June 30, 2021, and reported as of Dec. 31, 2021. As of Dec. 31, 2021, 81% of those NPLs had been resolved, the FHFA reported.
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 homes occupied by borrowers had the highest rate of foreclosure avoidance outcomes (42.3% foreclosure avoided versus 17.1% for vacant properties).
NPLs on vacant homes had a much higher rate of foreclosure, more than double the foreclosure rate of borrower-occupied properties (77.9% foreclosure versus 33.7% 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.
The average unpaid principal balance of nonperforming loans sold was $185,292.
Fourteen percent of permanent modifications of NPLs incorporated arrearage and/or principal forgiveness. The average forgiveness earned for these loans to date was $50,336 (with the potential for borrowers to earn an average forgiveness of $75,180). The average unpaid principal balance of NPLs sold was $185,292.
NPL Sales by State
December 2021
Oklahoma: 955 delinquent loans with an unpaid principal balance of $90.3 million.
Texas: 4,047 loans with $513.5 million in UPB.
New Mexico: 1,299 loans with an UPB of $195.3 million.
Arkansas: 608 loans with $62 million in UPB.
Kansas: 582 delinquent loans with $59.3 million in UPB.
New York: 21,151 nonperforming loans with an unpaid principal balance of $5.336 billion.
Florida: 21,032 NPL with $3.797 billion in UPB.
New Jersey: 20.946 NPL with a UPB of $4.598 billion.