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FREDDIE MAC STARTS
SELLING RE-PERFORMING
LOANS
Freddie Mac will conduct its first-ever
structured sale of seasoned loans from its
mortgage-related investments portfolio, ac-
cording to an announcement from Freddie
Mac.
e pilot sale for Freddie Mac-guaranteed
loans serviced by JPMorgan Chase is worth
$199 million, and the majority of loans are less
than six months current or are moderately
delinquent, according to Freddie Mac. e
collateral is comprised of Option Adjustable-
Rate Mortgages (ARMs) and loans that were
originated as Option ARMs but were later
modified either through the government's
Home Affordable Modification Program
(HAMP) or a proprietary modification.
e seasoned loan transaction includes
two steps. e first step is a competitive bid-
ding process; in the second step, the buyer of
the loans will securitize the loans after the
completion of collateral due diligence, accord-
ing to Freddie Mac.
e transaction will expand Freddie Mac's
re-performing loan (RPL) securitization
program, which has securitized approximately
$24 billion to date, and consists of loans that
were previously delinquent and are currently
performing—many as a result of a modifica-
tion. e transaction also expands Freddie
Mac's non-performing loan (NPL) sales
program, which has sold and settled NPLs
totaling $4.3 billion in aggregate unpaid
principal balance through March 31, 2016.
e NPL program sales feature loans that are
deeply delinquent, sometimes by as many as
three, four, or five years.
"e RPL securitization program and
NPL sales program are a key part of Freddie
Mac's strategy to reduce less liquid assets in
its mortgage-related investments portfolio,
shed credit and market risk via economically
reasonable and well-controlled transactions,
potentially improve borrower outcomes in
the event of a default and promote neigh-
borhood stability," Freddie Mac said in the
announcement. "It is a key requirement of this
transaction that the buyer of the subordinate
tranche must be an investor with substantial
experience managing 'high-risk' mortgage
loans as well as substantial experience in
securitizations."
e servicing of the loans in the seasoned
loan sale will be in accordance with require-
ments similar to those that apply in Freddie
