Fannie Mae and Freddie Mac purchased nearly $267 billion in nonperforming loans out of MBS pools during the first half of the year, a figure that — potentially — could lead to massive foreclosures down the road if the GSEs cannot rework these problem loans.

The acquisition of these nonperformers from MBS trusts was a record—by far—and it appears both companies, for now, are winding down their repurchases.

Fannie bought $170 billion in NPLs out of trusts during the first half, saving close to $1.4 billion, noted one source familiar with the matter. Freddie repurchased $96.8 billion, according to a public filing with the Securities and Exchange Commission.

By acquiring delinquent loans, the GSEs can save massive amounts of money because they do not have to pass on principal and interest payments on the loans to the end bond holders.
But the acquisitions also serve as a canary in the coal mine, so to speak.

"We're hearing plenty of talk that the GSEs are ramping up to start pushing foreclosures through the pipeline," said one mortgage insurance executive who works closely with them.

Investors in the nonperforming loan market, foreclosure vendors and Wall Street analysts are keeping a close eye on GSE delinquent loans as a harbinger of where the market might be headed.

Estimates vary but some mortgage advisors and analysts predict that foreclosures could total upwards of seven million units over the next three years. (Of course, recent foreclosure scandals involving Ally Financial and Chase may extend out that timeline.)

There is talk that the GSEs might list some of their NPLs on auction site bulletin boards.
Meanwhile, Fannie and Freddie also were busy buying newly originated performing mortgages from their seller/servicers during the first half.

According to company reports compiled by National Mortgage News, Fannie bought $253 billion in residential product during the first half, compared to $179 billion for Freddie.

During this time, Ginnie Mae issued $192 billion in MBS — bonds that are backed by (mostly) newly originated Federal Housing Administration and U.S. Department of Veterans Affairs loans.

When it comes to market share of new production, Fannie leads the pack with 37% compared to 28% for Ginnie and 26% for Freddie Mac.

Compared to 2009, Fannie and Freddie's market shares have slipped while GNMA's has gained.

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