Fannie Mae to Begin Auctioning Defaulted Home Loans to Investors

Fannie Mae will begin bulk auctions of mortgages, including some sales targeted for non-profit groups and small investors, as the company moves to cut the number of non-performing loans on its books.

“These transactions are intended to reduce the number of seriously delinquent loans that Fannie Mae owns, to help stabilize neighborhoods and to offer borrowers access to additional foreclosure prevention options,” Fannie Mae Senior Vice President Joy Cianci said in a statement Thursday. “Our goal is to market these loans to a diverse range of buyers.”

The Federal Housing Finance Agency, which has overseen U.S. conservatorship of Freddie Mac and Fannie Mae since 2008, is requiring the companies to reduce the number of severely delinquent loans on their books this year. In March, the agency released a set of new rules for the sale of troubled mortgages.

Freddie Mac has auctioned about $2 billion in defaulted debt in three separate sales since last year. Fannie Mae’s first sale will happen “in the near future,” the company said.

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.

Demand for soured mortgages has been increasing as Wall Street firms compete to buy loans at a discount after a real-estate market rebound. 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.

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