The Federal Housing Finance Agency (FHFA) has released a report on non-performing loans (NPLs) sold by Fannie Mae and Freddie Mac (the GSEs) through the first half of 2024. The Enterprise Non-Performing Loan Sales Report also provides information about how NPL sales through December 31, 2023, led to better outcomes for borrowers.
Since the program’s inception in 2014, the report shows, the GSEs have sold 171,333 NPLs with a total unpaid principal balance (UPB) of $31.4 billion through June 30, 2024.
The loans included in these NPL sales had an average delinquency of 2.8 years, and an average current mark-to-market loan-to-value (LTV) ratio of 82%. Foreclosure was avoided for borrowers in 40% of the 165,643 loans sold.
The Non-Performing Loan Sales program reduces the number of deeply delinquent loans in the GSEs’ portfolios and transfers credit risk to the private sector. FHFA and the GSEs impose requirements on NPL buyers designed to achieve more favorable outcomes for borrowers than foreclosure. At December 31, 2023, the GSEs held 42,667 NPLs in portfolio, of which 7% were sold and settled during the first half of 2024.
The Enterprise Non-Performing Loan Sales Report shows that the GSEs sold 2,969 NPLs (defined as loans one year or more delinquent) during the first two quarters of 2024 ending June 30, representing an unpaid principal balance (UPB) of $500 million.
As delinquencies have eased since the COVID-19 pandemic and the implementation of new loss mitigation programs, the volume of NPL sales has also declined and stabilized since 2021, when the GSEs sold 24,164 NPLs totaling an UPB of $4.1 billion. At June 30, loans one year or more delinquent in GSE portfolios totaled 36,700, an 82% decline from the 208,147 NPLs in portfolio at the end of 2021.
Highlights of NPL Sales
- The average delinquency for pools sold has ranged from 1.1 years to 6.2 years.
- Fannie Mae has sold 117,437 loans with an aggregate UPB of $21.1 billion, an average delinquency of 2.8 years, and an average LTV ratio of 79%.
- Freddie Mac has sold 53,896 loans with an aggregate UPB of $10.3 billion, an average delinquency of 2.7 years, and an average LTV ratio of 88%.
- NPLs in New Jersey, New York, and Florida represent 39.4% of the NPLs sold.
Borrower Outcome Highlights
- The borrower outcomes in the report are based on 165,643 NPLs since the program began in 2014 that were settled by December 31, 2023, and reported as of June 30, 2024.
- NPLs that were sold during the life of the program have resulted in fewer foreclosures as compared to similarly delinquent GSE NPLs that were not sold.
- Of the NPL sales on borrower-occupied homes, 47% have resulted in foreclosure avoidance, which exceeded the rates for both non-borrower-occupied (44.7%) and vacant (17.7%).
- NPLs on vacant homes have had a much higher rate of foreclosure (75.7%) than that on borrower-occupied properties (28.9%) and non-borrower-occupied properties (31.8%). Foreclosures on vacant homes typically improve neighborhood stability and reduce blight as the homes are sold or rented to new occupants.
- The average UPB of NPLs sold was $183,055.
Click here to read the latest Non-Performing Loan Sales Report.
