Are Fannie & Freddie Quietly Shopping $250 Billion in Non Performing Notes?
“There’s been lots of meetings and they’re talking to a lot of people about it,” said one veteran investment banker, requesting his name not be used because of the sensitivity of the matter, “but they’re a long way away from doing anything yet.”
One idea the two are said to be contemplating involves the securitization of NPLs. The GSEs would hire third-party vendors to gather broker price opinions on the properties collateralizing the mortgages. Fannie and Freddie might then issue a security backed by the NPLs based on the new BPO value. “If they could get 80% of the current BPO value they’d be ecstatic,” said one investment banker.
A few things:
1. 80% of BPO (Broker Price Opinion) value is a pipe dream.
2. If this DOES happen, it will put significant downward pressure on the market & for this reason alone, I’m skeptical…. but at the same time curious to see how this could be structured.
3. That’s A LOT of BPOs. (On a semi interesting, possibly related side note, we had a flood of BPO requests on Wednesday. We usually get around 5-10 a day from various servicers, but on Wednesday we had over 30.)