Both the U.S. Department of the Treasury and the Federal Housing Finance Agency are looking for ways to unload nonperforming loans from Fannie Mae and Freddie Mac, MarketWatch reported Oct. 16. The agencies want to shift responsibility for the loans to special servicers.
Speaking Oct. 16 at the Governor’s Housing Conference in Baltimore, Mary Miller, Treasury Under Secretary for Domestic Finance, said that handing over the loans to servicers who specialize in troubled loans could help speed up modifications and other solutions for delinquent borrowers, MarketWatch reported.
Special servicers are anxious to participate. Nationstar Mortgage, a servicer owned by private equity firm Fortress Investment Group, expanded its portfolio last year by establishing “sub-servicing” agreements with Fannie and Freddie and making outright purchases of servicing rights from the government-sponsored enterprises.
According to MarketWatch, these agreements brought Nationstar a $300 billion opportunity.
Some states are also trying out special servicers with the help of the Treasury’s Hardest Hit Fund, which offers aid to those states hardest hit by the housing crisis. The states use the funds to purchase nonperforming loans from private investors.
The U.S. Department of Housing and Urban Development also has been working to sell off nonperforming loans insured by the Federal Housing Administration, and special servicers have been obtaining business from banks, including Bank of America. The bank reached an $8.5 billion settlement with investors over faulty loans that offered financial incentives to encourage special servicers to either speed foreclosures or find alternative solutions for them.