Freddie Mac has sold via auction 7,186 non-performing residential first lien loans (NPL) from its mortgage-related investments portfolio. The loans, with a balance of approximately $1.2 billion, are currently serviced by Specialized Loan Servicing LLC, Select Portfolio Servicing Inc. and NewRez LLC (dba Shellpoint Mortgage Servicing).
The transaction is expected to settle in December 2021. The sale is part of Freddie Mac’s Standard Pool Offerings (SPO). Freddie Mac, through its advisors, began marketing the transaction on September 16 to potential bidders, including non-profits and minority, women, disabled, LGBT, veteran or service-disabled veteran-owned businesses (MWDOBs); neighborhood advocacy organizations; and private investors active in the NPL market. Bids for the upcoming Extended Timeline Pool Offering (EXPO), which is a smaller sized pool of loans, are due from qualified bidders by November 16.
For the SPO offerings, the loans were offered as four separate pools of mortgage loans. The four pools consist of mortgage loans secured by geographically diverse properties. Investors had the flexibility to bid on each pool individually and/or any combination of pools.
Given the delinquency status of the loans, the borrowers have likely been evaluated previously for loss mitigation, including modification or other alternatives to foreclosure, or are in foreclosure. Mortgages that were previously modified and subsequently became delinquent comprise approximately 64% of the aggregate pool balance. Additionally, purchasers are required to honor the terms of existing loss mitigation agreements and solicit distressed borrowers for additional assistance except in limited cases and ensure all pending loss mitigation actions are completed.
Advisors to Freddie Mac on the transaction are Citigroup Global Markets Inc and First Financial Network Inc.
Freddie Mac’s seasoned loan offerings are focused on reducing less-liquid assets in the company’s mortgage-related investments portfolio in an economically sensible way. This includes sales of NPLs, securitizations of re-performing loans (RPL) and structured RPL transactions.
To date, Freddie Mac has sold over $8 billion of NPLs and securitized approximately $75 billion of RPLs consisting of $30 billion via fully guaranteed PCs, $33 billion via Seasoned Credit Risk Transfer (SCRT) senior/sub securitizations, and over $11 billion via Seasoned Loans Structured Transaction (SLST) offerings. Requirements guiding the servicing of these transactions are focused on improving borrower outcomes and stabilizing communities.