Freddie Mac is selling more than $1 billion of soured U.S. home loans in its largest sale of the debt.
Potential buyers are bidding on three pools of nonperforming loans, with unpaid principal balances of about $660 million, $249 million and $125 million, according to debt broker Mission Capital Advisors. Homes tied to loans in the smallest group are all located in New York, while properties linked to the other two pools are geographically dispersed. Offers are due March 24.
"All the traditional NPL players will certainly be interested in bidding on these pools," said Gary McCarthy, a partner in HMC Assets LLC, a Redondo Beach, California-based firm that invests in delinquent loans. "This is something that we're going to see on an ongoing basis for a period of time."
The offering is the government-backed mortgage company's third large sale of delinquent home loans. Freddie Mac has been accelerating auctions of soured mortgages, bought from bonds guaranteed by the McLean, Virginia-based company that went bad after the housing crash. Demand has been increasing as Wall Street firms compete to buy the loans at a discount after a real estate market rebound.
Rising home values have prompted bidders for the loans to raise their offers, pushing up the prices of the debt and driving lenders such as Bank of America Corp., JPMorgan Chase & Co. and Citigroup Inc. to accelerate their sales of delinquent loans this year.
"The loans involved in this transaction are deeply delinquent, including a large share that are more than two years delinquent," Thomas Fitzgerald, a Freddie Mac spokesman, said in an e-mail. He wouldn't comment on the size of the pools being sold.
Banks and the Department of Housing and Urban Development have been the biggest sellers of the debt. Freddie Mac held its first loan sale in July of last year, for $659 million of nonperforming loans.
The Federal Housing Finance Agency, which regulates Freddie Mac and Washington-based Fannie Mae, is requiring the companies to reduce the number of severely delinquent loans on their books this year. This month, the agency released a set of new rules for the sale of troubled mortgages.
FHFA will require prospective investors to prove they've retained a loan servicer with a track record of handling delinquent debt, the agency said in a March 2 statement. Servicers also will have to offer aid to avoid foreclosures as a condition of sale.
Investment firms including Lone Star Funds, Bayview Asset Management LLC and Selene Finance LP have been some of the biggest buyers of delinquent home loans.
The New York pool may attract different buyers than the others, McCarthy said.
"To buy the New York pool, you better have boots on the ground to properly manage it," he said.