Billions of Non Performing Notes Selling in 2015

selling non peforming notesWe’re not even half way through the year and sales of non-performing note portfolios are already robust for 2015.

Part of the credit goes to requirements issued by The Federal Housing Finance Agency (FHFA) to reduce the number of delinquent loans in the portfolios of Freddie Mac and Fannie Mae prompting several sales by these GSEs (Government Sponsored Enterprises).

Largest Sale of Delinquent Loans by Freddie Mac

In March Freddie Mac executed its largest sale of delinquent loans to date on 5,389 seriously delinquent loans with an aggregate unpaid principal balance (UPB) of $985 million.

The sale was done via auction in three separate pools:

  • Pool #1: 3,577 loans with an aggregate UPB of $629.6 million
  • Pool #2: 1,331 loans with an aggregate UPB of $235.9 million
  • Pool #3: 490 loans with an aggregate UPB of $120.0 million

The averages on the three pools were:

  • Loan Size $182,562
  • Rate 5.5%
  • Delinquency: Approximately three years
  • Current LTV (to BPO): 76%.

The cover bid prices (second highest bids) were in the low 80’s percent of UPB for Pool #1, in the low 70’s percent of UPB for Pool #2 and in the mid 70’s percent of UPB for Pool #3.

Source: Freddie Mac News Release March 27, 2015

This followed an earlier sale by Freddie Mac of $392 million NPLs in February of this year and $596 million in August of 2014.

First NPL Offering by Fannie Mae

Fannie Mae jumped on the bandwagon by marketing its first ever offering of NPLs in April. The winning bids on approximately 3,000 loans totaling $762 million in UPB were announced on May 15, 2015 with closing anticipated in June.

The loans were offered in two separate pools:

  • Pool #1:  710 loans with an aggregate UPB of $173.8 million.
  • Pool #2:  2,358 loans with an aggregate UPB of $587.9 million.

The averages on the two pools were:

  • Loan Size $248,285
  • Rate 5.93%
  • Delinquency: Approximately five years
  • Current LTV (to BPO): 123%.

The cover bid prices (second highest bids) for Pool #1 is 71.9% of Broker Price Option (BPO) (58.8% UPB) and for Pool #2 is 71.0% of BPO (57.8% UPB).

Source: Fannie Mae News Release Dated May 15, 2015

Smaller Investors Targeted By Freddie Mac For Non Performing Loan Sales

The first Extended Timeline Pool Offering (EXPO) was rolled out in April in Miami-Dade County with bids due on June 2, 2015. EXPOs will be smaller pools with longer marketing times specifically designed to provide smaller investors time to secure funds to participate in the auctions.

All of these developments are in addition to the billions in ongoing sales of non-performing assets by traditional banks, hedge funds, and other entities.

Where Does The Private Note Investor or Broker Fit In?

Buying multi-million dollar portfolios of non-performing notes takes very deep pockets. They are often purchased by private equity hedge funds willing to buy the whole offering. They then carve out the notes they do not want and sell off in smaller pools or individual notes to private investors.

If you are reading all this and wondering, “Where do I fit in?” Here are some helpful tips:

1. Understand the differences between an originated mortgage loan and a seller-financed note by reading this article:

Can You Please Define Private Mortgages?

2. Decide if you are a performing buyer looking for cash flow or a non-performing buyer ready for negotiating a work-out or taking the property back as explained in this article:

What about buying or brokering non-performing and defaulted notes?

3. Learn the ropes from investors actively in the non-performing market. Our Finding Cash Flow Notes Training is on seller financed performing notes. Why? Because that is our primary focus and we like to teach what we do (crazy right?) If you want to learn the non-performing side of the note business a great start is to watch this video from Troy Fullwood, the NPN Pro:

How To Get Your Slice of a 580 Billion Dollar Opportunity!


About Tracy Z

Tracy combines her knowledge of cash flow notes with the power of marketing online to help grow your business! She can be reached at 1-888-999-7905 or at Exposure One Marketing.


  1. Before the sub primp crash I purchased 36 second position Non Performing Mortgages. I Foreclosed on these houses made tens of thousands of dollars on each deal. My best and most profitable deal I made $80,000 at closing and this was done with my own money. So, now I am coming out of retirement and starting over but this time I will use other peoples money and we make millions. Anyone interested? I have closing statements as proof of my profits.

  2. Hi Tracy,
    Where can I find a forum for buying available performing notes and selling same to interested investors? Is there such a thing?

  3. Hi Tracy,

    Do you have a short list of hedge funds that will sell non performing notes to individuals? Most will only sell in bulk to other funds- but i know there are some out there that will at least give tapes to individual investors, and sell to them too.

  4. Margaret Konieczny says

    Tracy, I am in the process of buying a second mortgage on rental property. The owner still has the 1st.
    HE has good rental income but the property is in a low income area and needs major repairs. He says the area is zoned commercial and believes in a couple of years he will sell it to some one with commercial interest.
    This note buying intrigues me. I hope I am doing the right thing. I am buying the 55,000 note for 50,000 and a monthly payment of 200.00. When the property sells in two years I will be paid the 55,000.
    Does this sound like a deal you would make?

    • Hello Margaret and thanks for visiting and commenting on our site. Each investor has a different threshold for risk. Notes that are in 2nd lien position are considered VERY high on the risk scale. That doesn’t meant they can’t be done. It just means there is a higher likelihood of default and an investor should be compensated with a higher return for that risk.

      Here are a couple of links with articles on our site with more information:

      It is important to be sure you can get whole should the note in question default (or if the 1st lien should default). That would depend on 1) The current fair market value of the property 2) the amount of the 1st lien and 3) the ratio of the 1st to the second. Knowing whether the rental income can cover the debt, income, and expenses along with the payer’s credit score and note payment history would also be indicators of future repayment.

      I would also want a higher return. Yield calculations aside, that is a lot of risk for a $5,000 return in two years. For me, there are better returns in the note business without that amount of risk. It is also good to know the general “going rate” for a note. This provides liquidity should an investor need to resell later and it makes sure you are not drastically overpaying for the note. In my experience second liens often go for 50 cents on the dollar. In the case you described (where the owner still has the 1st) I would prefer to buy a partial on that 1st (rather than the second). This is going to lower the risk and lower the discount the seller would need to take.

      Ultimately the decision is up to each individual investor but in short… No this does not sound like a deal I would make.

      None of this is meant to be discouraging rather I encourage you to outline your parameters and keep finding deals that meet your note investing goals.

      Tracy Z

      These comments and this website are designed for informative purposes only and are provided with the understanding that neither the author nor the publisher is engaged in rendering legal, accounting, or investing advice. If legal, tax, and investment advice or other expert assistance are required, the services of a competent professional person should be sought.

  5. Tracy Z,

    I am enjoying this forum and the information/tips I’m gleaning about things note related!

    I need you to go back in time and refresh my memory on hypothecating a note I want to use as collateral for the loan I’m going to get. Sound familiar?? Please reconstruct the verbiage I would use to accompoliish this. Or if you have a made up template that you can email to me I would deeply appreciate it.

    What other papers would the closer/attorney need to see or have, ( new note ect.) to fund the deal. I am using investors to fund it.

    In the Northeast, I haven’t found an attorney yet who is even knowledgable about Hypothecation!

    Well thanks in advance for your help. If I hear back by October 5, I may see you in Dallas!!!


    • Hello Chuck, The majority of institutional investors structure the note as a full or partial purchase rather than a hypothecation. There can be pros and cons to a hypothecation, with one pro being the note holder can still be liable for repayment. Other issues can come into play including lending laws. We have samples of standard note purchasing documentation in the Finding Cash Flow Notes Training but we always encourage getting all documents reviewed by the title company and an attorney as we are not able to give legal or financial advice.

  6. Josiah Rich says

    I would like to know how to get started as an investor. Are there mortgage notes for as low as 10 k ?

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