FHA Expands Disposition Program
Posted by Matthew Brian Hersh on July 18, 2012
HUD announced today that it will make 3,500 distressed loans available through its Distressed Asset Stabilization Program—part of an expansion to the FHA disposition program that sells pools of defaulted mortgages headed for foreclosure.
A competitive application process in four metro areas—Chicago, Newark, NJ, Phoenix, and Tampa, Fla.—will determine which applicant can buy loans "at a market-determined price generally below the outstanding principal balance," according to HUD following a news conference Wednesday morning. Beyond that, FHA would processes an insurance claim and remove the FHA insurance, whereupon the loan gets transferred to the investor. At this point, foreclosure on the loan would be delayed for at least six months, allowing the servicer and the borrower to explore alternatives.
This is good news for the localities represented here and represents a 60 percent increase in potential distressed single-family loan sales since FHA began selling loans through the Distressed Asset Stabilization Program in 2010. We've covered efforts on the ground in places like Arizona and Illinois to buy and modify distressed loans preforeclosure. How this program pans out in those communities—where, in some cases, there are significant stabilization initiatives underway—remains to be seen.
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Matthew Brian Hersh proudly served as senior editor at Shelterforce from March 2008 to October 2012. He studied English at Rutgers University and has spent his professional career in journalism, policy, and politics. He displays many of the trappings of a New Jersey sports fan: dispirited Mets fan, former Nets fan before they left the state, and normally satisfied Giants fan. Hersh lives in Highland Park, NJ with his wife and two children.