Guides › Selling non-performing loans

How to sell non-performing loans: a guide for banks and lenders

Not legal, tax or accounting advice. General information for US banks, credit unions and lenders, current as of October 19, 2026. Confirm accounting treatment and supervisory expectations with your auditors, counsel and regulator.

Short answer: A non-performing loan (NPL) is usually a loan 90 or more days past due or on nonaccrual. Lenders sell NPLs as whole loans before charge-off or as charged-off debt afterwards. Group similar loans into pools, prepare a loan tape and files, let buyers review them under an NDA, take competing bids and close under a loan sale agreement.

This guide is for lenders deciding whether, when and how to sell loans that have stopped paying.

Key takeaways

There is no single legal definition. A common benchmark is the FDIC's noncurrent-loan definition: 90 or more days past due, or on nonaccrual.
Under the FFIEC policy for banks, retail loans should be classified Loss and charged off once they are 120 (closed-end) or 180 (open-end) cumulative days past due, so an unsecured retail NPL becomes a charge-off within months.
As a general pattern, secured loans tend to be sold as whole loans before charge-off, and unsecured retail loans after charge-off.
Pool loans with similar characteristics, share evaluation materials only after a confidentiality agreement, and take competitive bids.
Sale terms can follow the loan: in the Fannie Mae and Freddie Mac NPL program, FHFA requirements make buyers' servicers follow a loss-mitigation waterfall and report borrower outcomes for four years.

On this page

Want to see if buyers are interested in your portfolio?

Confidential introductions to debt buyers, free for sellers of charge-off portfolios. Summary business data only, and a mutual NDA before any documents. No obligation. We are paid by buyers through a per-introduction fee; sellers pay nothing.

Request introductions

Or estimate a price range first

What counts as a non-performing loan?

There is no single legal definition. A common benchmark is the FDIC's definition of noncurrent loans: the sum of loans and leases 90 days or more past due and loans and leases in nonaccrual status (FDIC QBP Notes to Users). Many lenders and buyers treat these as non-performing.

Non-performing is not the same as charged off. For retail credit at banks, the FFIEC policy says closed-end retail loans that become past due 120 cumulative days and open-end retail loans that become past due 180 cumulative days should be classified Loss and charged off (FFIEC Uniform Retail Credit Classification Policy, 65 FR 36903). The policy applies to banks and savings associations supervised by the Federal Reserve, FDIC and OCC (and formerly OTS). NCUA, also an FFIEC member, said in 2000 it did "not plan to adopt the Uniform Policy at this time" (FFIEC Uniform Retail Credit Classification Policy, 65 FR 36903).

For credit unions, NCUA's Letter 03-CU-01 (January 2003, still active) says the board should tailor a charge-off policy to the credit union's size and complexity, and that the policy should address loans presenting a high probability of loss. Its examples include "a non-performing loan more than six months past due without a payment of at least 75 percent of a regular monthly installment within the last 90 days" (NCUA Letter 03-CU-01). Commercial loans follow your own credit policy and examiner guidance. For what happens after charge-off, see charge-off accounting.

Should you sell NPLs before or after charge-off?

As a general pattern (our analysis, not a market statistic), secured loans tend to be sold as whole loans before charge-off, while unsecured retail loans tend to be sold after charge-off because the FFIEC timelines move them there within months.

Before charge-off (whole-loan sale): typical for secured loans such as residential mortgages, commercial real estate and equipment loans. The buyer takes the loan, the lien and the borrower relationship, and prices the collateral and the workout.
After charge-off (charged-off debt sale): typical for unsecured retail loans such as cards, personal loans and overdrafts. The steps are in how to sell charged-off debt.

Residential mortgages add borrower notices. A new owner of a consumer mortgage loan generally must notify the borrower within 30 days (12 CFR 1026.39), and the old and new servicers send transfer notices under Regulation X (12 CFR 1024.33). For a single note, see how to sell a mortgage note or mortgage note buyers.

For charged-off consumer debt, OCC Bulletin 2014-37 notes that debt sales can turn nonperforming assets into immediate cash and reduce the internal resources spent on collection, and says "Banks may price debt based on a small percentage of the outstanding contractual account balances" (OCC Bulletin 2014-37). The bulletin covers sales of charged-off consumer debt; it is supervisory guidance, not a regulation, and it also expects the banks it supervises to document a financial analysis showing why selling is more beneficial than other options, such as managing collection internally (OCC Bulletin 2014-37).

Which non-performing loans can you sell?

Most loan types trade. The FDIC says the most common loan types in its loan sales are loans secured by commercial or residential real estate, commercial and industrial loans, and consumer loans, and that they can also include agricultural loans, credit cards, leases, government-backed loans and lead participations (FDIC Loan Sales). The FDIC sells failed-bank loans "regardless of performance status or quality" (FDIC Loan Sales).

Check first whether you can sell a loan at all. Participations, loans with servicing or pledge agreements, loans held in a securitization, and loans in bankruptcy or active litigation may need consents or should stay out of the pool. For consumer debt, the OCC lists accounts that are clearly not appropriate for sale, including those of borrowers in bankruptcy, deceased account holders, accounts in litigation with the bank, fraud and accounts without clear evidence of ownership (OCC Bulletin 2014-37).

How does an NPL sale work?

Pool the loans. Group loans with similar characteristics. The FDIC lists performance status, loan type, loan size, collateral and location as pooling considerations (FDIC Loan Sales).
Prepare the loan tape and files. Balances, payment history, delinquency and nonaccrual dates, collateral details and lien position, plus the notes, mortgages or security agreements, assignments and servicing notes.
Sign confidentiality agreements. In FDIC sales, bidders sign a confidentiality agreement before they can see evaluation materials (FDIC Loan Sales). Share summary figures first and loan-level data only after that point.
Take competitive bids. The FDIC markets its loan pools on a competitive, sealed-bid basis (FDIC Loan Sales). Some sellers also run an indicative round, then a final round for the top bidders.
Sign the loan sale agreement and close. It sets the cutoff date, reps and warranties, repurchase terms and how files and servicing transfer.

Timing depends on the pool. For its own sales, the FDIC says a loan sale takes about 120 days from start to finish (FDIC Loan Sales). Comparing selling routes? See debt marketplace vs. managed sale.

What do NPL buyers check?

Ownership and chain of title: original notes, endorsements and assignments, and any participations.
Collateral: its current value, lien position, insurance and taxes, and, for real estate, occupancy and foreclosure status.
Borrower history: payments, modifications, workout offers and bankruptcy filings.
Legal status: pending litigation or foreclosure, judgments and state law issues.
Servicing requirements that come with the sale. In the Fannie Mae and Freddie Mac NPL program, FHFA requirements say bidders must identify their servicing partners, servicers must apply a loss-mitigation waterfall with foreclosure as the last option, and NPL buyers' servicers must report loan resolution results and borrower outcomes for four years after the sale. Loans under a forbearance plan, or under one within the past 90 days, are not eligible for those sales (FHFA NPL and RPL Sale Requirements, June 22, 2023).

Request confidential introductions first

Request introductions

Or estimate a price range first

What drives the price of a non-performing loan?

There is no standard price for NPLs; each pool is priced on its own facts. Buyers generally weigh:

Collateral value and lien position, for secured loans.
How long the loans have been delinquent.
Documentation quality and chain of title.
Legal status and state rules on foreclosure and collection.
Pool size and how similar the loans are.

For unsecured charged-off consumer debt, see how much debt buyers pay.

Where SellChargeOffs fits

SellChargeOffs is a service that helps lenders, creditors, law firms and businesses sell charged-off debt portfolios to debt buyers, including portfolios from banks and credit unions. Some buyers purchase loans before charge-off and others buy only charged-off accounts, so ask each buyer what it takes. You share summary figures only, with no borrower data; account data moves only after a mutual NDA, and only to buyers you approve. Buyers make their offers to you directly. You decide whether to sell and sign your own sale agreement with the buyer. We are not a debt collector and never contact consumers. We are paid by buyers through a per-introduction fee; sellers pay nothing.

Large secured or commercial loan pools may warrant a loan sale advisor. The FDIC, for example, runs its loan sales with loan sale advisors (FDIC Loan Sales). For bank and credit union sales, see debt sales for banks and credit unions.

Sources

FDIC, Quarterly Banking Profile Notes to Users: fdic.gov
FFIEC, Uniform Retail Credit Classification and Account Management Policy, 65 FR 36903 (June 12, 2000): federalregister.gov
NCUA Letter to Credit Unions 03-CU-01, Loan Charge-off Guidance (January 2003): ncua.gov
FDIC, Loan Sales: fdic.gov
FHFA, Non-Performing and Re-performing Loan Sale Requirements (June 22, 2023): fhfa.gov
OCC Bulletin 2014-37, Consumer Debt Sales: Risk Management Guidance: occ.gov
12 CFR 1026.39, Mortgage transfer disclosures (Cornell LII): law.cornell.edu
12 CFR 1024.33, Mortgage servicing transfers (Cornell LII): law.cornell.edu
NCUA legal opinion on the sale of charged-off loans (1997): ncua.gov
12 CFR 701.23, Purchase, sale and pledge of eligible obligations: ecfr.gov

Selling non-performing loans FAQ

What is a non-performing loan?

There is no single legal definition. A common benchmark is the FDIC's definition of noncurrent loans: loans 90 or more days past due or on nonaccrual status, which many lenders and buyers treat as non-performing.

Is a non-performing loan the same as a charged-off loan?

No. A loan can be non-performing for months before it is charged off. Under the FFIEC policy for banks, retail loans should be classified Loss and charged off once they are 120 (closed-end) or 180 (open-end) cumulative days past due; commercial loans follow the lender's credit policy.

Can a credit union sell loans before they are charged off?

Possibly, but it is less settled. A 1997 NCUA legal opinion covers federal credit unions selling charged-off loans. Selling loans that are not yet charged off raises other questions, such as participations and servicing, so check NCUA guidance, your state regulator and counsel. Federal credit unions may sell eligible obligations of their members to any source "within the limitations of the board of directors' written sale policies" (12 CFR 701.23(c)).

How long does it take to sell non-performing loans?

It depends on the pool. For its own failed-bank loan sales, the FDIC says a sale takes about 120 days from start to finish. Small, well-documented pools may move faster, in our view.

Do I need consumer data to get a price for my NPLs?

Not at first. Summary figures such as loan type, balance, count, delinquency dates and collateral type are enough for an initial range. Loan-level data should move only after a confidentiality agreement or NDA.

Where should you go next?

General information only, not legal, tax or accounting advice. SellChargeOffs is not a debt buyer or a broker, and is not a collector. We are paid by buyers through a per-introduction fee; sellers pay nothing.