The Federal Housing Finance Agency (FHFA) recently released a report on non-performing loans (NPLs) sold by Fannie Mae and Freddie Mac (the Enterprises) through the first half of 2024, according to a release.

The Enterprise sales report also provides information about how NPL sales through Dec. 31, 2023, led to better outcomes for borrowers.

Since the program’s inception in 2014, the report shows, the Enterprises have sold 171,333 NPLs with a total (UPB) of $31.4 billion through June 30, 2024.

The loans included in these NPL sales had an average delinquency of 2.8 years and an average current mark-to-market loan-to-value (LTV) ratio of 82 percent.

Foreclosure was avoided for borrowers in 40 percent of 165,643 loans sold.

The report shows that the Enterprises sold 2,969 NPLs (defined as loans one year or more delinquent) during the first two quarters of 2024 ending June 30, representing an unpaid principal balance (UPB) of $500 million.

As delinquencies have eased since the COVID-19 pandemic and the implementation of new loss mitigation programs, the volume of NPL sales has also declined and stabilized since 2021, when the Enterprises sold 24,164 NPLs totaling an UPB of $4.1 billion. On June 30, loans one year or more delinquent in Enterprise portfolios totaled 36,700, an 82 percent decline from the 208,147 NPLs in portfolio at the end of 2021.

The NPL sales program reduces the number of deeply delinquent loans in the Enterprises’ portfolios and transfers credit risk to the private sector. FHFA and the Enterprises impose requirements on NPL buyers designed to achieve more favorable outcomes for borrowers than foreclosure.

On Dec. 31, 2023, the Enterprises held 42,667 NPLs in portfolio, of which 7 percent were sold and settled during the first half of 2024.

Highlights of NPL Sales Between 2014 – June 30, 2024 were:

• The average delinquency for pools sold has ranged from 1.1 years to 6.2 years.
• Fannie Mae has sold 117,437 loans with an aggregate UPB of $21.1 billion, an average delinquency of 2.8 years, and an average LTV ratio of 79 percent.
• Freddie Mac has sold 53,896 loans with an aggregate UPB of $10.3 billion, an average delinquency of 2.7 years, and an average LTV ratio of 88 percent.
• NPLs in New Jersey, New York, and Florida represent 39.4 percent of the NPLs sold.

  Borrower Outcome Highlights were:

• The borrower outcomes in the report are based on 165,643 NPLs since the program began in 2014 that were settled by December 31, 2023, and reported as of June 30, 2024.
• NPLS that were sold during the life of the program have resulted in fewer foreclosures as compared to similarly delinquent Enterprise NPLs that were not sold.
• Of the NPL sales on borrower-occupied homes, 47 percent have resulted in foreclosure avoidance, which exceeded the rates for both non-borrower-occupied (44.7 percent) and vacant (17.7 percent).
• NPLs on vacant homes have had a much higher rate of foreclosure (75.7 percent) than that on borrower-occupied properties (28.9 percent) and non-borrower-occupied properties (31.8 percent). Foreclosures on vacant homes typically improve neighborhood stability and reduce blight as the homes are sold or rented to new occupants.
• The average UPB of NPLs sold was $183,055.
• FHFA will continue to provide reporting on NPL sale borrower outcomes on an ongoing basis.