FHA Achieving Higher Recoveries on Loan Sales

Mortgage & Real Estate

The Federal Housing Administration sold over 8,000 nonperforming loans at an Oct. 30 sale and recovered 60% of the unpaid principal balance of the loans.

This is a slightly better than the previous loan sale in June, when the winning bidders paid on average 53% of the UPB.

The official results show that FHA rejected bids on two of the 11 loan pools at the Oct. 30 sale. The two pools had extremely low broker price opinions relative to the unpaid principal balance of the loans.

Pool 103 with 1,700 loans had a UPB of $330 million and a total BPO of $196 million. FHA might have been testing the market with this offering and the bids did not meet its minimum requirements.

DLJ Mortgage Capital Inc. successfully bid for the 105 and 106 pools. The 105 pool had a UPB of $148 million and a BPO of $133 million.

The Credit Suisse subsidiary offered to pay 61.5% of the UPB or 68.5% of the BPO for the 105 pool.

Overall, 17 companies bid for 10,600 FHA nonperforming loans on Oct. 30 and the agency sold 8,172 loans. Servicers that put those FHA loans up for sale have generally exhausted all loss mitigation options.

However, the successful bidders cannot foreclose on these loans for six months. This restriction is designed to give the new servicer a chance to restructure the loan and keep the borrower in their home.

DebtX marketed the FHA loan sale and SEBA Professional Services LLP managed the sale.

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