Two large government-related investors saw their annual nonperforming-loan sales reverse course and resume an upward trend for the first time since 2021, adding to signs that more distressed mortgages are slowly making their way to market as pandemic restrictions get lifted.
The number of NPLs Fannie Mae and Freddie Mac sold in 2024 rose to 5,207 from 5,067, marking the highest level since 2022's 8,325, according to their regulator, the Federal Housing Finance Agency. NPL sales have been falling since they peaked at 24,164 in 2021. NPLs are typically one year or more delinquent.
Getting nonperforming loans off the books help position the government-sponsored enterprises' favorably at a time when the Trump administration is considering a public offering for some of their shares with potential rebranding as
A drop in the number of NPLs on the two government-sponsored enterprises' books to 36,169 from 42,667 as the volume of sales rose also suggests that they were quicker to bring NPLs to market in the past year.
This marked the lowest number of NPLs on Fannie and Freddie's books since at least 2015.
Making headway in removing older NPLs from the books
Breakdowns by loan age show that the enterprises also had fewer older distressed loans on their books last year.
In 2024, the bulk, or 25,368 of the loans on the GSEs' books, were less than two years old. Another 8,051 were older but still had less than five years of seasoning. The balance, 2,750 of these loans, were five-plus years old.
The previous year, Fannie and Freddie had 42,667 NPLs on their books, 25,191 of which were less than two years old. Another 13,931 were more than two years old but less than five. The balance or 3,545 of these loans were five years old or more.
Older loans in the delinquent inventory tend to have higher foreclosure rates.
The latest report from the FHFA shows NPLs in arrears for less than two years have a foreclosure rate of 31.6% compared to 44.6% for those in the 2 to nearly 5-year range. Loans that have been distressed for 5-plus years had a 58.1% foreclosure rate.
How resolutions differed by occupancy status
Differences in resolutions based on verified
Borrower-occupied properties experienced fewer foreclosures at a rate of 28.9% compared to 32% for those that may have residents living in them that are not the mortgagor. Vacant properties had the highest foreclosure rate at 75.8%.
A year earlier the foreclosure rate for borrower-occupied properties was 29.1% compared to 31.9% for properties with non-mortgagor residents. Vacant properties had a 76% foreclosure rate.
LTVs dip, concentration in three states persists
The average loan-to-value ratio dipped, with Fannie's at 79% and Freddie's clocking in at 87%.
Since the enterprises began programmatic NPL sales back in 2015, three states have represented more than 39% of the volume: New York, 13.6%; Florida, 13%; and New Jersey, 12.8%. The next largest state concentration in Illinois was just 5.2%.
