Fannie Mae is contemplating auctioning nonperforming mortgages from its portfolio, according to vendors and investors who operate in the NPL sector.
The government-controlled secondary market giant declined to comment about the situation, and officials who have talked to Fannie about the idea did not want to be identified for fear of losing a potential client.
Industry officials said that, if Fannie Mae sells NPLs — instead of foreclosing on the mortgages and selling the resulting real estate-owned, or REO, properties — it could save hundreds of millions of dollars, depending on the final sale price.
During the past year it, along with Freddie Mac, its sister company, have bought nearly $267 billion of NPLs out of their mortgage-backed securities pools.
Now that the two have taken title to these assets, they must either work out the loan through a servicer or foreclose. (Both have been in government conservatorship since September 2008.)
Fannie at times has been impatient with the progress made by some of its servicers in handling "high-touch" mortgages, yanking away servicing rights from such customers as Flagstar Bancorp and others. A little more than two years ago it was contemplating buying the subservicer Litton Loan Servicing in Houston to focus attention on delinquent loans, but the deal eventually fell through and then Fannie went into conservatorship. (See related story.)
At the end of September, Fannie by itself had $212 billion of nonperforming loans on its books. In the third quarter alone it took control of 85,349 housing units, according to a recent Securities and Exchange Commission filing.
The company has a policy of first trying to sell its REO to owner occupants but has engaged in bulk sales of homes in undesirable neighborhoods or units that are severely dilapidated.
About two weeks ago Fannie sent out for bid a $30 million pool of bulk REO, according to investors who have seen the offering circular.
A sale has yet to close. Buyers can bid on the entire package or certain geographic segments.
At press time, a bid deadline could not be established. A spokeswoman for Fannie Mae had no information on the package or a deadline.