Reperforming loans are defined by Fannie Mae as mortgages that were previously delinquent but are performing again because payments have become current — with or without the use of a modification plan. Fannie Mae began selling RPL loans in October 2016 “to reduce the size of its retained mortgage portfolio,” according to the agency.
“There’s always an appetite for distressed packages on the secondary market,” Rick Sharga, executive vice president of marketing for real-estate research firm RealtyTrac, said in a prior interview with HousingWire. “People are looking for securities where they believe the risk-reward ratio is appropriate for their taste.”
Fannie Mae last year put on the market some 100,000 reperforming loans across five offerings with an aggregate unpaid principal balance of $14.5 billion, according to an analysis of the agency’s records.
By comparison, over the same period in 2020, as the pandemic raged and government protections kicked in, a total of 57,235 RPLs were put on the sales block by Fannie Mae through four pool offerings that had a total unpaid principal balance of $8.7 billion — or a bit more than half of the RPL sales by loan count and $5.7 billion shy of the 2021 aggregate value mark. In 2019, prior to the pandemic, Fannie sold nearly 104,000 reperforming loans valued in total at $17.1 billion.
Fannie’s fellow government-sponsored enterprise, Freddie Mac, favors securitizing RPL pools as opposed to selling the loans off its books.
“To date, Freddie Mac has … securitized more than $73 billion of RPLs,” states an October 5, 2021, press release announcing the pricing of Freddie’s final RPL deal of the year — a $564 million offering backed by a pool of reperforming loans. To date, Freddie has not announced any new RPL transactions for 2022.
Over the past three years, Freddie’s securitizations have trended downward, from a total of seven offerings in 2019 backed by RPL pools with an aggregate value of nearly $13 billion to some six offerings in 2020 backed by reperforming loan pools with a total value of $8.2 billion, Freddie Mac’s records show. Last year, the agency sponsored five securitization deals backed by RPL pools with a combined value of some $4.3 billion.