Freddie Mac will make its first-ever structured sale of seasoned loans from its mortgage-related investment portfolio, according to an announcement from Freddie Mac on Wednesday.
The pilot sale of Freddie Mac secured loans managed by JPMorgan Chase is worth $ 199 million, and the majority of loans have been less than six months or moderately past due, according to Freddie Mac. The collateral is made up of adjustable rate mortgages (ARMs) and loans that were created as an optional ARM, but which were then changed through the government’s Affordable Modification Program (HAMP) or an exclusive modification.
The seasoned loan transaction involves two stages. The first step is a competitive bidding process; in the second stage, the loan buyer will securitize the loans after the completion of the collateral due diligence, according to Freddie Mac.
The transaction will expand Freddie Mac’s Reproductive Loan Securitization (RPL) program, which has securitized approximately $ 24 billion to date, and consists of loans that were previously in arrears and are currently performing, many of which are in the past. following a modification. The transaction also expands Freddie Mac’s non-performing loan (NPL) sales program, which has sold and settled NPLs totaling $ 4.3 billion in total outstanding principal through March 31, 2016. NPL’s program sales have very bad loans, sometimes up to three, four or five years.
“The RPL securitization program and the NPL sell program are a key part of Freddie Mac’s strategy to reduce less liquid assets in its portfolio of mortgage-related investments, eliminate credit and market risk through economically reasonable and well-controlled transactions, potentially improving borrowers’ results in the event of default and promoting neighborhood stability, ”said Freddie Mac in the announcement. “It is a key requirement of this transaction that the buyer of the subordinated tranche must be an investor with substantial experience in managing ‘high risk’ mortgages as well as substantial experience in securitizations.”
The loan department in the sale of seasoned loans will comply with similar requirements to those that apply to the sales of nonperforming loans (NPLs) of Freddie Mac.