Freddie Mac Sells Thousands of Non-Performing Notes
Investor Bonus: See Exclusive Mortgage Notes For Sale Every Thursday
Government Sponsored Entity Freddie Mac has sold off almost $20 million worth of non-performing notes to investors. Get the full story here...
David Garner
Non Performing Note Sale by Freddie Mac
As a small, private investor, it’s unlikely that you’ll be first in line when the big boys and girls start selling their non performing mortgage notes. But judging by the latest asset sales by Freddie Mac, it looks like you might need less than you think to buy in…
Freddie Mac – the Government Sponsored Entity responsible for underwriting the bulk of residential mortgage loans in the USA – recently announced that it auctioned off 88 non-performing mortgage notes with a combined balance of about $20 million.
The sale was specifically targeted at women-owned businesses, and was ultimately purchased by GITSIT Solutions LLC and VRMTG ACQ LLC. Part of Freddie’s Extended Timeline Pool Offering (EXPO), this sale is due to close in Q4 this year (2023).
Most of these non-performing notes are likely already in the process of loan modification. Some may even have been worked through to foreclosure. Loans that were previously modified but fell back into default comprise about one third of the pool by unpaid balance. The successful buyers are required to honor existing agreements with borrowers negotiated through previous loss mitigation.
This sale follows on from the previous auction of of over 3,000 non performing mortgages by Freddie Mac in September. That sale saw loans with a combined unpaid balance of around $586 million sold mostly to ‘smaller’ private investors.
Earlier this month (October) Freddie’s sister, Fannie Mae also announced it was selling off some of its non performing loans…
That sale was made up of a combination of smaller loan pools, including a Community Impact Pool (CIP). These smaller loan pools are typically marketed to smaller investors, including minority owned businesses and women owned businesses. The CIP pool included in the sale comprised around 60 non-performing notes – mostly located in New York – with an unpaid balance of over $18 million.
Related: Real Estate Notes | Everything You Need To Know
Previous to that sale, another auction of non-performing notes from a CIP pool (the 21st CIP pool) also occurred in September. A buyer paid 87% of the unpaid balance of $6.4 million for 25 non-performing notes. This worked out to about 27% of the estimated value of the underlying real estate!
These sales of non performing mortgages by Freddie Mac and Fannie Mae to smaller, non-institutional investors is testament to investor appetite for these interesting alternative assets.
In the current environment defined by uncertainty in financial markets, stubborn inflation, and high interest rates, more investors are turning to mortgage note investing strategies.
The idea is to diversify out risk, and profit from higher rates of passive income and/or access to heavily discounted real estate.
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