Fannie Mae and Freddie Mac sold nonperforming loans at their third slowest rate on record last year, in sharp contrast to more aggressive activity in 2021.
Sales of 8,325 NPLs settled in 2022, falling from 24,164 the previous year, the Federal Housing Finance Agency reported Tuesday. Just 4% of the 208,147 loans that were a year or more delinquent at the end of 2021 sold, compared to a record-setting 30% the previous year.
Nonperforming loan sales haven't been this low since the onset of the pandemic in 2020, when the annual total was 4,051 and 8% of those Fannie and Freddie held at the end of 2019 sold.
This year's numbers may not be very large either, given that Fannie and Freddie took some time out between February and June to outfit the non- and reperforming loan programs with new foreclosure prevention measures and additional reporting requirements.
The revamp of the program followed February hearings in which some Democrats expressed concerns that nonperforming loan sales can displace residents and remove properties from an owner-occupied resale market that's short on inventory.
The Biden administration has been working to do more to address this concern by stepping up existing efforts to sell loans to community buyers. However, the number that go to them has been limited in line with the capacity and resources of those small investors.
Roughly 16% of the nonperforming loan pools Freddie has sold have taken the form of smaller, regional pools designed to be more palatable to community buyers. Fannie's equivalent share is closer to 19%.
The foreclosure avoidance rate for these distressed mortgage sales improved slightly in 2022, ending the year at 38% compared to 36% the previous year.
However, 41% of loans proceeded to foreclosure, 20% were unresolved. The strategy that staved off foreclosure most often was a permanent modification (10.7%), similar to the previous year.
Loans secured with homes occupied by borrowers or others had a foreclosure avoidance rate of almost 44%, up from closer to 42% the previous year. Only around 17% of loans collateralized by vacant homes avoided foreclosure in 2022, similar to 2021.
Servicer contact helped prevent foreclosure nearly 49% of the time, compared to close to 25% for nonperforming loans lacking it.
The length of time borrowers had gone without paying ranged from a little over 12 months to more than six years.
Properties in New York, Florida or New Jersey collateralized 40% of the nonperforming loans sold, down slightly from 41% the previous year.
In total, Fannie and Freddie brought $30 billion or 163,297 in nonperforming loan sales to market from the program's start through the end of last year, Fannie was responsible for around two-thirds of that amount.
The loans had an average 2.8 years of delinquency and 84% loan-to-value ratio. Freddie's nonperforming loans have had a higher average loan-to-value ratio than Fannie's at 90% and 81%, respectively. Freddie's average delinquency lasts 2.7 years as compared to 2.8 for Fannie.
