Freddie Mac Further Reduces Seriously Delinquent Loans From Its Investment Portfolio

MCLEAN, VA–(Marketwired – Jul 31, 2015) – Freddie Mac (OTCQB: FMCC) today announced it sold via auction 3,577 deeply delinquent non-performing loans (NPLs) from its mortgage investment portfolio on July 28th, 2015 with an aggregate unpaid principal balance (UPB) of $591 million. The transaction is expected to settle in September, 2015 and the sale is part of Freddie Mac’s Standard Pool Offerings (SPO(SM)). 
These loans have been delinquent for approximately three years, on average. Given the deep delinquency status of the loans, the borrowers have likely been evaluated previously for or are already in various stages of loss mitigation, including modification or other alternatives to foreclosure, or are in foreclosure. Mortgages that were previously modified and subsequently became delinquent comprise approximately 28% of the aggregate pool balance.
The loans were offered as three separate pools of mortgage loans, and investors had the flexibility to bid on one or more pools, or bid on the aggregate of all three pools. All of Pool #3 is comprised of loans with loan-to-values less than 50% of the property value, based on BPO (Broker Price Opinion). The three pools, winning bidders and cover bid prices (second highest bids) are summarized below:

Description
 
Pool #1
 
Pool #2
 
Pool #3

Unpaid Principal Balance
 
$444.7 million
 
$76.8 million
 
$69.3 million

Loan Count
 
2,533
 
347
 
677

Average Loan Size ($000)
 
$175.5
 
$221.4
 
$102.4

BPO weighted CLTV
 
86.2
 
84.7
 
34.5

Geographical Distribution
 
National Pool
 
100% New York
 
National Pool

Winning Bidder
 
Pretium
Mortgage Credit
Partners I Loan
Acquisition, LP
 
Nomura Corporate
Funding Americas,
LLC
 
MTGLQ
Investors, LP

Cover Bid Price (second highest bid price)
 
Low $80s
 
Mid $60s
 
Low $110s

Freddie Mac, through its advisors, began marketing the transaction on July 8, 2015 to potential bidders, including minority and women owned businesses (MWOBs), non-profits, neighborhood advocacy funds and private investors active in the NPL market.
On March 2, Freddie Mac’s regulator and conservator, the Federal Housing Finance Agency (FHFA), announced enhanced requirements for NPL sales. Requirements on winning bidders’ servicers include:

Servicer must be approved by and in good standing with Freddie Mac, Fannie Mae, Ginnie Mae, or FHA.

All servicers must agree to service in accordance with applicable law.

Servicers must prioritize loan modifications over short sales or deeds in lieu of foreclosure, and foreclosure must be the last option; and for loans that transition to REO (Real Estate Owned), servicers must encourage sales to owner occupants and non-profits.

Servicers must comply with the requirements of the U.S. Department of the Treasury’s Making Home Affordable programs, including the Home Affordable Modification Program (HAMP), and evaluate eligible borrowers for such programs. 

Servicers must evaluate all borrowers who are determined ineligible for HAMP (other than those with an imminent foreclosure sale date or vacant property) for a proprietary modification.

Servicers must honor completed modifications, and those in trial or applications in process at the time of sale, and continue to close in-process modifications unless they are able to offer terms more favorable to borrowers.

Subsequent servicers must agree to assume the responsibilities of the initial servicer.

Advisors to Freddie Mac on the transaction were Citigroup Global Markets Inc., Credit Suisse Securities and The Williams Capital Group, L.P., an MWOB. Freddie Mac was established by Congress in 1970 to provide liquidity, stability and affordability to the nation’s residential mortgage markets. Freddie Mac supports communities across the nation by providing mortgage capital to lenders. Today Freddie Mac is making home possible for one in four home borrowers and is one of the largest sources of financing for multifamily housing. Additional information is available at FreddieMac.com, Twitter @FreddieMac and Freddie Mac’s blog FreddieMac.com/blog.