Bank of America is offering $1.2 billion of mostly delinquent home loans, extending a series of sales by lenders seeking to pare holdings and meet demand by investment firms for soured mortgages.
The company is selling five pools consisting of nonperforming debt, loans that have been modified and resumed payment, and some that haven't defaulted, according to a person with knowledge of the matter. Four of the pools are being serviced Bank of America and one is managed by Ocwen Financial, said the person, who asked not to be identified because the planned sale is private.
Banks, forced to pledge more capital for some assets they hold in the face of financial regulations, have sold or offered about $18 billion of defaulted home loans so far this year, according to debt broker Mission Capital Advisors. The buyers have included hedge funds and private-equity firms hungry for nonperforming loans as a way to bet on distressed real estate as foreclosures dry up, with the purchases often financed through the bond market.
Dan Frahm, a spokesman for Charlotte, North Carolina-based Bank of America, declined to comment.
Investment firms such as John Grayken's Lone Star Funds; Bayview Asset Management, a Coral Gables, Florida-based company backed by Blackstone Group; and Houston-based Selene Finance, with investors including bond pioneer Lewis Ranieri, have been some of the biggest buyers of delinquent home loans. In addition to banks, the U.S. Department of Housing and Urban Development, Fannie Mae and Freddie Mac are selling the debt.
About $32 billion of nonperforming loans and modified or reperforming loans traded or came to market in 2014, data compiled by Mission Capital show.