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Non-Performing Loan Sales


In an effort to reduce substantial inventories of non-performing loans (NPLs) and improve borrower outcomes, in 2014 FHFA approved a pilot program by Freddie Mac to sell NPLs and later approved sales of NPLs by both Enterprises. FHFA announced enhanced requirements for the Enterprises’ NPL sales in March 2015. Additional enhancements were announced in April 2016. FHFA believes that the sale of severely delinquent loans through NPL sales will improve borrower and neighborhood outcomes and will reduce Enterprise losses while reducing risk to taxpayers.

KEY ELEMENTS OF ENHANCED NPL SALE GUIDELINES

  • NPL buyers must evaluate borrowers whose mark-to-market loan-to-value ratio is over 115 percent for modifications that include principal reduction and/or arrearages forgiveness.
  • NPL buyers may not “walk away” from vacant properties.
  • Proprietary modifications must be fixed rate or offer an initial period of reduced payments with limits on subsequent increases consistent with HAMP requirements – the initial fixed-rate period must last for at least 5 years, and rate increases are limited to 1 percent per year thereafter.

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