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‘Significant improvements’ coming for HUD's distressed-asset program


Foreclosure

The U.S. Department of Housing and Urban Development (HUD) announced “significant improvements” to its Distressed Asset Stabilization Program (DASP) in an effort to protect delinquent homeowners from losing their homes to private investors that purchase severely delinquent mortgages — and then often seek to foreclose immediately to recoup that investment.

Borrowers with distressed mortgages insured through the Federal Housing Administration (FHA) may even be eligible for a reduction on their outstanding loan balance if their mortgages are sold through the DASP program. Improvements to the FHA program require private investors to offer principal forgiveness to borrowers as their first option. The new rules also prohibit investors from walking away from low-value properties in areas already blighted by high foreclosure numbers.

"FHA is deeply committed to protecting struggling homeowners and making certain they have the greatest opportunities to avoid foreclosure and remain in their homes," said Ed Golding, principal deputy assistant secretary for HUD's Office of Housing.

The new FHA program enhancements also include “payment shock protection,” which limits interest rate increases to 1 percent per year after a five-year, fixed-rate period. This improvement is based on the Home Affordable Modification Program (HAMP). 

In an effort to provide more opportunities for nonprofit organizations and local governments to participate in the DASP program and help with urban blight, the FHA will allow nonprofit buyers to bid on a partial pool of loans and pay the reserve price. The FHA also plans to streamline direct sales to interested governmental entities and continue to reach out to local governments in distressed areas to solicit their interest in the DASP.

These enhancements to the DASP are in addition to improvements instituted last year that expanded a six-month moratorium on foreclosures to 12 months for loans sold through the program and required purchasers of distressed mortgages to suspend any foreclosure action against borrowers covered by the moratorium.

"While thousands of homeowners avoided foreclosure through this note sales program,” said Golding in the HUD news release, “we continue to explore new ways to help these families and to offer more opportunities for public-minded organizations to have a seat at the table."

Questions? Contact Will McDermott at (800) 297-6026 or willm@scotsmanguide.com.


 

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