Freddie Mac recently announced that it is auctioning $1.2 billion in nonperforming loans (NPLs) – its eighth NPL sale of the year.
The deeply delinquent loans are being marketed via seven pools: five geographically diversified standard pool offerings and two geographically concentrated extended timeline pool offerings.
Earlier this year the company 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 – including non-profits and minority and women-owned businesses – a better chance of coming up with the funds needed to buy them, the company says.
Bids are due Dec. 2 for the standard pool offerings and Dec. 16 for the extended timeline pool offerings. The sales are expected to settle in the first quarter of 2016.
The winning bidder will be determined on the basis of economics, subject to meeting Freddie Mac's internal reserve levels, the company says in a press release.
To participate, all potential bidders must be approved by Freddie Mac to access the secure data room containing information about the NPLs and to bid on the NPL pool.
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.
The company also recently launched a new Web page for investors providing information on future NPL sales, located at http://www.freddiemac.com/npl/.
In addition, the Federal Housing Finance Agency (FHFA), overseer of the government-sponsored enterprises, earlier this year 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.