I am preparing for a “virtual meetup” tomorrow and ran all of the 2018 Fannie Mae non-performing and re-performing sales numbers. The biggest buyer, by far, was Credit Suisse which purchased 51,324 loans with Un-Paid Balances of $11,109,101,320. The second largest buyer was Goldman Sachs with 28,333 loans with UPB’s of $5,460,662,361. A few securities and insurance companies made up the balance of loan sales totaling $20,583,341,543 in UPB.

Why have these two companies been so aggressive in purchasing these assets? The answer is within these two pictures:

You see, as a result of the legal settlement, Goldman Sachs must help consumers to the sum of $1.8 billion while Credit Suisse, will need to help to the tune of $2.8 billion. Both lawsuits say that they can help by offering relief to underwater homeowners and distressed borrowers in the form of loan forgiveness and financing for affordable housing.

They both chose to help by offering loan forgiveness. Why?

When they buy non-performing loans (at a discount), they focus on homeowners who owe more than their house is worth, then they modify the loan with debt forgiveness. The amount of debt forgiveness they give, comes right off of their lawsuit total. Once they get the loan re-performing, they sell it at a profit.

The good news here for note investors is that neither company will keep those loans, so this is future inventory for us.

Kevin Shortle