Government-Sponsored Enterprises (GSEs) Undercut Goals of Expanding Homeownership Through Bulk Sales of Homes to Investors
WASHINGTON – Today, the National Consumer Law Center released a report examining how Fannie Mae’s and Freddie Mac’s bulk sale of 700,000 home loans to private investors has undercut their goals of supporting and expanding homeownership. Fannie Mae and Freddie Mac (government-sponsored enterprises, or “GSEs”) insure or own approximately one-half of the residential mortgage loans in the United States. When their loans are sold, the homeowners lose access to streamlined foreclosure alternatives created to help homeowners save their homes. The report outlines specific steps the agencies should take to ensure that future loan sales do not harm borrowers and communities.
“Especially during the pandemic, the GSEs created effective options to help borrowers avoid foreclosure,” said Andrea Bopp Stark, staff attorney from the National Consumer Law Center. “Unfortunately, at the same time, the GSEs were selling loans and stripping pandemic-impacted borrowers of their access to these plans. These sales are particularly concerning because we know borrowers of color were hit hardest by the pandemic.”
During the height of the COVID pandemic, Fannie Mae sold off 99,100 reperforming loans, the highest total for any year.
“In assessing Fannie Mae’s and Freddie Mac’s reports, we saw gaps in the reported data and conclusions based on outdated control groups that do not reflect current market conditions,” said Steve Sharpe, staff attorney from the National Consumer Law Center.
The report provides stories from homeowners whose loans were sold to illustrate the real-life consequences of this practice, discusses how the GSEs have inadequately estimated the harms, and concludes that the GSEs are not engaging in sufficient data analysis to justify note sales.
To minimize the loss of vital foreclosure avoidance options for homeowners with GSE loans and promote home retention, NCLC recommends further guardrails on the note sale program, including protections to homeowners prior to the sale, increased post-sale requirements on buyers, and improved data.