Go Back

Bank of America, Citigroup Said to Sell Soured Home Loans

Bank of America Corp. and Citigroup Inc. are selling multiple pools of soured mortgages to meet demand from investment firms that are pushing prices higher, according to three people with knowledge of the matter.

Bank of America put about $1 billion of troubled debt on the market last week, consisting of nonperforming loans and some where payments have resumed, said the people, who asked not to be identified because the offerings are private.

The Charlotte, N.C.-based lender also is marketing about $1 billion of soured home loans with Wells Fargo & Co., according to one of the people. Citigroup is separately selling about $1 billion of nonperforming and re-performing mortgages, the people said.

Dan Frahm, a spokesman for Bank of America, and Mark Costiglio, a spokesman for Citigroup in New York, declined to comment on the loan sales. Elise Wilkinson, a spokeswoman for San Francisco-based Wells Fargo, also declined to comment.

Lenders have accelerated sales of defaulted mortgages to avoid the costs of holding the debt and as hedge funds and private-equity firms seek to profit from rising home values. The Department of Housing and Urban Development has also been selling loans, including a current offering of about $1.1 billion, to reduce losses at the financially troubled Federal Housing Administration.

"The market has been pretty robust and it remains robust," said Luis Vergara, managing director at loan broker Mission Capital Advisors LLC. "Prices have been exceptionally strong this year."

More firms are seeking to acquire the soured debt, including hedge funds such as Metacapital Management LP and One William Street Capital Management LP. Wall Street-backed companies that have built home-rental businesses, such as American Homes 4 Rent, Starwood Waypoint Residential Trust, Altisource Residential Corp. and Axonic Capital LLC, are also buying nonperforming loans to expand their property holdings.

About $30 billion of bad loans probably will change hands in the second half of this year, according to Michael Nierenberg, chief executive officer of New Residential Investment Corp., which invests in mortgage-related assets.

About $30 billion of the debt was sold in the first half, more than the roughly $25 billion traded in all of 2013, New Residential estimates.

Gaining the delinquent debt is attractive to real estate investors as the inventory of distressed properties dwindles. Foreclosure filings dropped this year to the lowest level since 2006 as home values climbed in Southern California, Florida and other markets hit hard by the housing crash, according to RealtyTrac.

© 2006 - 2020. All Rights Reserved.