Despite seasonal fluctuations typically seen in the winter months, recent market reports have shown foreclosures and delinquencies continue to decrease to levels not seen since before the housing crisis. This recovery is aided by work done throughout the industry to rehabilitate seriously delinquent loans. Case in point is the GSEs offering sales of non-performing loans to accomplish their stated goal of helping borrowers avoid foreclosure while decreasing the amount of deeply delinquent mortgage loans from their investment portfolios.
This week, the FHFA released a follow up analysis on their first Non-Performing Loan Sales Report that was presented in June to include sales data through August 31, 2016 and preliminary outcomes for borrowers as of June 30, 2016.
To encourage winners of these sales to prioritize the goal of the offerings, FHFA updated their requirements for bidder qualifications, modifications, loss mitigation, REO sales, subsequent servicer requirements, bidding transparency, and reporting requirements on March 2015. The requirements were again updated in April of 2016 to reflect changes in small pools and “walkaways.”
Winners of these pools are working to turn these seriously delinquent loans back into reperforming loans. Scott Fergus CEO of National Community Capital (a subsidiary of New Jersey Community Capital, winner of four out of five Community Impact Pool offerings from Fannie Mae) discussed in a recent interview with DS News the outcomes of non-performing pools that National Community Capital has purchased.
“We, to this point, have been successful in modifying approximately 20 percent of the loans in our pool,” said Fergus. “We're roughly about 3 times better than most of the competitors or most of the other NPO purchasers in the business. We would like to do more, but we feel very good about the numbers that we're reaching, considering that of all of the loans that we buy, anywhere from 45-55 percent of a loan pool that we purchase are really only owner-occupied loans.”
According to the new report, Fannie Mae and Freddie Mac sold 59,629 non-performing loans with an aggregate unpaid principal balance (UPB) of $11.9 billion. With the addition of three months-worth of data, this bumped the number of loans sold up by nearly 18,000 loans and $3.4 billion from the previously issued data. The number of loans that resulted in foreclosure avoidance also increased within the three months over 5 percent from 12 percent to 17.1 percent as of August 2016.
With the information FHFA has received with NPLs sold by December 31, 2015, the agency says that only 31 percent of the loans have been resolved and this leaves more information to be gathered on the outcomes associated with the offerings.