Weekly Real Estate News
Summary
Freddie Mac awarded four pools of 1,968 deeply delinquent loans totaling $428 million in unpaid principal to VRMTG ACQ and Igloo Series VII Trust. Settlement is expected in December; borrower loss-mitigation agreements remain binding.
Freddie Mac has named buyers for four pools of deeply delinquent home mortgages with approximately $428 million in unpaid principal, advancing a loan sale it began marketing in September. The auction covers 1,968 first-lien loans. The transaction is expected to settle in December, so the awards do not yet represent a completed transfer.
Freddie Mac announced the auction results Thursday, identifying VRMTG ACQ, LLC as the winning bidder for three pools and Igloo Series VII Trust as the winner of a fourth. VRMTG’s pools contain 1,815 loans with a combined unpaid principal balance of $388.7 million. Igloo’s pool contains 153 loans totaling $39.3 million.
The disclosure resolves the principal question left open when Freddie Mac put approximately $474 million of nonperforming mortgages on the market September 16: who would buy the standard pools. The earlier offering also included a smaller Extended Timeline Pool Offering, which remains on a separate bidding schedule. Freddie Mac said qualified bids for that pool are due October 23.
Four pools, two winning bidders
VRMTG acquired the auction rights to a $189 million pool of 911 loans, a $128.3 million pool of 608 loans and a $71.4 million pool of 296 loans. Igloo won the $39.3 million pool of 153 loans. The loans are secured by properties distributed nationally.
These are not newly originated mortgages. Borrowers in the four pools are, on average, between 15 and 21 months delinquent, depending on the pool. Freddie Mac said approximately 51% of the aggregate unpaid principal balance consists of mortgages that were modified previously but subsequently became delinquent again.
That concentration matters for the servicing work ahead. Freddie Mac said the borrowers have likely already been considered for loss mitigation, including loan modifications or other foreclosure alternatives, or are in foreclosure. Purchasers must honor existing loss-mitigation agreements, complete pending assistance actions and solicit distressed borrowers for additional assistance except in limited circumstances.
Those obligations operate within the Federal Housing Finance Agency’s requirements for enterprise nonperforming-loan sales. The regulator says the programs are intended to transfer risk out of the enterprises’ portfolios while maintaining borrower protections.
What the auction figures do — and do not — reveal
The $428 million figure is the loans’ unpaid principal balance, not the amount the winning bidders agreed to pay. Freddie Mac did not disclose the winning purchase prices.
It did publish ranges for the cover bids, meaning the second-highest bids. Those were in the mid-90% range of unpaid principal for the first two pools, the low-to-mid-90% range for the third and the mid-80% range for the fourth. The figures cannot be used as the buyers’ actual purchase prices.
Credit characteristics vary between pools. Freddie Mac reported unpaid-principal-weighted combined loan-to-value ratios of 61% and 59% for the first two pools, compared with 74% for each of the remaining pools. The average loan balances range from approximately $207,400 in the first pool to $256,900 in the fourth.
The loans are currently serviced by Select Portfolio Servicing, NewRez’s Shellpoint Mortgage Servicing, Selene Finance and Rocket Mortgage’s Rushmore Servicing business. Freddie Mac did not identify which individual loans or servicing transfers would be associated with each buyer after settlement.
Freddie Mac said BofA Securities and First Financial Network advised on the transaction. It describes the sale as part of a broader effort to reduce less-liquid assets in its mortgage-related investment portfolio. Since 2011, the company says it has sold $11.4 billion of nonperforming loans and securitized approximately $81.7 billion of reperforming loans.
For borrowers in the affected pools, the immediate announcement is an auction award, not a change in their mortgage obligations. Settlement is still expected in December, and the existing loss-mitigation requirements remain central to what happens when ownership and servicing arrangements are finalized.
