What is a Reperforming Loan - RPL

A reperforming loan is a loan in which the borrower was behind on payments (delinquent) by at least 90 days but has resumed making payments. The payments that the borrower missed have not necessarily been paid, however. Often, the borrower of a reperforming loan has filed for bankruptcy and has continued making payments as a result of the bankruptcy agreement. Borrowers whose loans are classified as reperforming will have fewer refinancing options because of their past delinquencies.

BREAKING DOWN Reperforming Loan - RPL

For mortgage investors, reperforming loans are considered risky (much like subprime loans). They fall into a category known as "scratch-and-dent" loans. Rating agencies look at a borrower's repayment patterns and the lender's ability to manage the loan in determining investment risk for reperforming loans. That stands in contrast to a nonperforming loan, in which the borrower has not made payments for over 90 days and has not resumed repayment of the loan.

Packaging and Selling Reperforming Loans

Fannie Mae has been carrying billions of dollars worth of delinquent mortgages since the housing crisis. With the recovery of the economy many of these loans are performing again — that is, payments on the mortgages have become current with or without the assistance of modification of loan terms. To get these mortgages off its books Fannie Mae packages and markets the reperforming loans to investors, usually through a money center bank. In November 2017, Fannie Mae concluded its fifth such sale of a package of reperforming loans, consisting of approximately 9,300 loans totaling $2.1 billion in unpaid principal balances. The winning bidder paid about 91 cents on the dollar for the package.