The Federal Housing Administration doubled its distressed loan sales from 5,000 sales per quarter to 9,000 sales beginning July through the Distressed Asset Stabilization Program.
The current commitment is to now sell at least 10,000 distressed loans per quarter over the next year as a result of the audit report projections, according to the U.S. Department of Housing and Urban Development.
After the release of the actuarial report last week, the FHA implemented a series of steps to turn capital reserve positive within the year, according to a HUD release. This includes the continuation to sell expanded pools of defaulted mortgages through DASP.
The series of steps could also reduce the possibility of petitioning to Congress to draw funds from the Treasury for the first time.
DASP offers investors and borrowers a chance to avoid foreclosures and also provide homeowners a chance to stay in their homes. The program also helps reduce fund costs.
“This program creates the opportunity for everyone – the homeowner, the new mortgage holder, FHA, and the community – to walk away a winner,” said Acting Commissioner Carol Galante with FHA in a statement from earlier this year. “FHA not only avoids the costs associated with a long foreclosure process, but also the high costs of maintaining and selling vacant properties in already distressed markets.”
Previously, Galante outlined parameters for the sales. For example, some pools of loans will be concentrated in areas hardest hit by the housing downturn.
FHA has sold more than 2,100 loans through DASP. An approved mortgagee can file a claim for FHA insurance benefits and assign the loan to the federal agency if the borrower is at least six months delinquent on their mortgage, servicers have exhausted all steps in the loss mitigation process, servicers has initiated foreclosure proceedings or the borrower has not declared bankruptcy.
