Freddie Mac is auctioning a $1.2 billion portfolio of deeply delinquent nonperforming loans (NPLs) currently serviced by Ocwen Loan Servicing.
The NPLs are being marketed as five geographically diversified pools. Bids are due by Sept. 9 and the sale is expected to settle in October, Freddie Mac says in a release.
This is Freddie Mac's sixth NPL auction of the year. Freddie Mac and its sister company, Fannie Mae, started to sell off their NPLs to investors earlier this year in an effort to divest themselves of certain nonperforming assets and in order to reduce taxpayer risk.
In April, Freddie Mac auctioned a $233 million pool of NPLs serviced by Ocwen.
That sale and this most recent one are, in part, a result of Ocwen's recent efforts to reorganize after a spate of regulatory enforcement actions that resulted in the company deciding to discontinue servicing agency-backed mortgages.
Freddie Mac recently announced that it is now selling its NPLs in smaller pools and marketing them for a longer period of time so as to give smaller investors a crack at them. This is being done through the company's Extended Timeline Pool Offering program. Offering the NPLs in smaller pools and marketing them for longer will give smaller investors a better chance of coming up with the funds needed to buy them, the company says.
The company also recently launched a new Web page for investors providing information on future NPL sales, located at http://www.freddiemac.com/npl/.
Earlier this year, the Federal Housing Finance Agency (FHFA), overseer of the government-sponsored enterprises, issued new rules requiring investors that purchase the NPLs to try harder to reach solutions with borrowers that allow them to keep their homes and avoid foreclosure – whether that means extending loan terms, writing-down principal or pursuing a short sale.
When a foreclosure cannot be prevented, the FHFA guidelines require the loan owner to market the property to owner-occupants and nonprofits exclusively before offering it to investors – similar to Fannie Mae's FirstLook program.