A Bloomberg report cited that Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) will soon start offloading its mortgages in a bid to trim the proportion of non-performing loans appearing on its books. The housing enterprise will auction these mortgages and will factor in some sales for non-profit groups as well as small investors. The company’s Senior Vice President Joy Cianci stated that the auctions will help the company to slash the percentage of critical delinquent loans.
FHFA’s new rules
Cianci added that the process will not only help safeguard neighborhoods but will also provide borrowers with an option of preventing foreclosures. He said that the idea of the auction if to market these loans and spread them to a diverse range of buyers. The move comes as a part of the Federal Housing Finance Agency’s (FHFA) requirement that the government-owned enterprise should reduce its exposure to extremely delinquent loans this year. The agency had issued the new rules in this regard in March.
While Federal Home Loan Mortgage Corp (OTCBB:FMCC) has already auctioned $2 billion worth of mortgage through three separate sales last year, it will be the first time when Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) will go for similar move. The sale of such delinquent debt is on a rise after Wall Street firms are more and more willing to buy these mortgages following a housing sector rebound. Big investment firms such as Bayview Asset Management LLC, Lone Star Funds and Selene Finance LP are some of the active buyers, purchasing severely soured mortgages.
Interested delinquent home loan buyers will have to prove that they have engaged a loan servicer with a track record of handling bad debt, as per the FHFA new rules. Moreover, the loan servicer will have to extend support to the borrower in order to avoid foreclosures. The stock of Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) traded up by 1.59% to $2.55 and recorded an average volume of 6.54 million shares.