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Fannie Mae Announces Sales of Non-Performing Loans

WASHINGTON, DC – Fannie Mae (FNMA/OTC) today announced that it will begin offering pools of non-performing single-family mortgages for sale to interested buyers. An initial transaction is expected to be marketed in the near future. Fannie Mae hopes in the future to enter into similar transactions, some of which will be targeted for purchase by non-profit organizations, smaller investors and minority- and women-owned businesses.

“These transactions are intended to reduce the number of seriously delinquent loans that Fannie Mae owns, to help stabilize neighborhoods, and to offer borrowers access to additional foreclosure prevention options,” said Joy Cianci, Fannie Mae’s Senior Vice President for Credit Portfolio Management. “Our goal is to market these loans to a diverse range of buyers. We look forward to building these sales into a regular, programmatic offering to the market.”

Recently, the Federal Housing Finance Agency (FHFA) announced guidelines that must be followed when Fannie Mae or Freddie Mac sells non-performing loans. These guidelines require, among other elements, that the new owner of the loans offer mortgage modifications to borrowers. When a foreclosure cannot be prevented, the FHFA guidelines require the loan owner to market the property to owner-occupants and non-profits exclusively before offering it to investors, similar to Fannie Mae’s FirstLook® program.

Fannie Mae announced on Wednesday that it will make available for purchase to qualified bidders a bundle of approximately 3,200 non-performing single-family residential mortgage loans (NPLs) totaling about $786 million in unpaid principal balance (UPB).

The loans are being offered in two pools, one with $180 million in UPB and one with $606 million in UPB. The marketing for the NPL sale begins Wednesday and bids are due on May 6. Fannie Mae said it expects the sale to close in mid to late June.

Bidders must meet qualifications set forth by FHFA. In early March, FHFA issued enhanced requirements for the buyers and servicers of Agency non-performing loans that call for bidders to identify servicing partners at the time of qualification and complete a questionnaire to demonstrate a record of successful loan resolution through foreclosure alternatives, since many of the loans being sold in these portfolios are deeply delinquent – two years or more delinquent in some cases. As part of the new requirements, servicers who purchase non-performing Agency loans must apply a "waterfall of resolution tactics" before resorting to foreclosure. When foreclosure cannot be avoided, the loan owner is required to market the property exclusively to owner-occupants and non-profits before seeking out investors to purchase it.

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