Login
In a move to reduce illiquid assets, Freddie Mac is auctioning $410 million of delinquent mortgage loans. The Government-Sponsored Enterprise (GSE) recently concluded the offer period for the major sale. This latest auction of Freddie Mac’s inventory marks the second time the GSE has held a major auction to clean its portfolio.
The GSEs have come a long a way since 2012 when delinquent loans and mortgages securities into private-label bonds comprised more than half of their portfolios. Freddie Mac’s first auction was held in July 2014 when $659 million in delinquent loans was auctioned to a single buyer. The GSEs are mandated by the Federal Housing Finance Agency (FHFA) to minimize delinquent loans as part of the conservatorship which remains in effect.
The delinquent loans will be split into three portions for auction, each amounting to $160 million, $141 million, and $109 million.
Although Freddie Mac is conducting its second auction of bulk sales, there is no word yet on a similar Fannie Mae auction to reduce delinquent loans. However, Fannie Mae has made strides in reducing its gross mortgage portfolio separately. With an $818 billion portfolio in June 2010, the GSE has continuously decreased its compound annualized rate per the FHFA’s request.
Fannie Mae had an initial 2014 goal of reducing its gross mortgage portfolio to $469.6 billion with a revised cap of $422.7 billion. Currently, the portfolio has decreased to $413 billion.
The GSEs have made clear efforts to reduce delinquent loans in compliance with the goals of the FHFA who currently holds the GSEs under conservatorship. With bidding closed for the Freddie Mac auction, the respective GSE is one step closer to a cleaner portfolio.