JPMorgan Chase & Co. is offering $390 million of non-performing loans as banks including HSBC Holdings Plc and Regions Financial Corp. increasingly look to sell troubled mortgage debt.
JPMorgan put the pool of debt, a portion of which is tied to residential properties in New York, on the market this week, said two people with knowledge of the offering, who asked not to be named because the sale is private. HSBC hired BlackRock Inc. to manage the potential sale of as much as $1 billion in delinquent loans and Goldman Sachs Group Inc. is handling an auction of about $700 million of modified loans for Regions, according to two separate people.
Sales of the debt are accelerating amid financial regulations that force banks to pledge more capital for some assets they hold, including non-performing loans, or NPLs. The government also is adding to the supply as it auctions the debt to help prevent foreclosures and stem losses at the Federal Housing Administration.
"Banks have made a decision internally that a delinquent borrower is not a core customer,"Ashish Pandey, chief executive officer of Altisource Residential Corp. (RESI), said at a conference in Las Vegas last month. Pandey, whose firm had 6,300 delinquent loans as of the third quarter of 2013, said he expects as many as 500,000 non-performing loans to sell in 2014.
Potential buyers of non-performing loans, tied to delinquent borrowers who haven't yet lost their homes to foreclosure, include hedge-fund firms such as Ellington Management Group LLC and One William Street Capital Management LP. The firms are seeking alternative housing bets after subprime-mortgage bond prices jumped about 17 percent last year and property prices surged 24 percent from their 2012 low.
Values increased as the economy strengthened and firms led by Blackstone Group LP bought more than 366,200 single-family homes in cities such as Phoenix and Atlanta since January 2011 to turn into rentals, according to Port Street Realty and RealtyTrac data. That's made delinquent loans a relatively cheaper way to acquire real estate or profit by working with borrowers who are behind on mortgage payments.
There are about 1.3 million properties in the U.S. tied to loans at least 90 days late and not yet in foreclosure, according to Black Knight Financial Services. Another 4.5 million borrowers are at least 30 days delinquent or in the repossession process, a Black Knight report showed last week.
Regions transferred $686 million of loans classified as troubled debt restructurings to held-for-sale in the fourth quarter, the bank said on a Jan. 21 call with investors. The majority of the loans were originated prior to 2007 and about 40 percent are located in Florida.
Amy Bonitatibus, a spokeswoman for New York-based JPMorgan, declined to comment on the bank's offering. Rob Sherman, an HSBC spokesman, and BlackRock's Brian Beades, declined to comment on the potential loan sale. Michael DuVally, a spokesman for Goldman Sachs and Evelyn Mitchell, a spokeswoman for Birmingham, Alabama-based Regions, declined to comment on Goldman Sachs's role in the offering.