FHA Expands Asset Stabilization Program in Four Cities
The Federal Housing Administration announced its formal expansion of its Distressed Asset Stabilization Program designed to help as many as 9,000 FHA borrowers avoid foreclosure, MBA NewsLink reported July 19.
FHA will be expanding the program in four major metropolitan areas hit hard by the foreclosure crisis — Chicago, Newark, N.J., Phoenix and Tampa, Fla. Acting FHA Commissioner Carol Galante said 3,500 loans would be sold in those cities; Chicago alone will account for 1,500.
The program, which has operated on a pilot basis since 2010, sells pools of defaulted mortgages to investors at market-determined prices that generally are lower than the mortgage’s outstanding principal balances. FHA then processes the insurance claims and transfers the loans to the investors, who are required to delay foreclosure at least six months while coming up with alternative solutions for the delinquent borrowers, MBA NewsLink reported.
Since the pilot began, 2,100 single-family homes have gone through the program.
Galante said the program works because investors, who buy the properties at less than the outstanding principal balance, can still make a return on investment while modifying the loans or by helping the borrower sell the home through a short sale.
“Providing the opportunity for the borrowers to potentially stay in their home under a new sustainable mortgage or other meaningful help not only benefits the homeowner but reduces the costs to FHA and ultimately benefits the entire community,” U.S. Housing and Urban Development Secretary Shaun Donovan told MBA NewsLink.
Bidding on the properties will continue through September. Investors must be qualified by HUD and have experience in asset management and a track record of successfully helping seriously delinquent borrowers stay in their homes.