The U.S. Department of Housing and Urban Development (HUD) is making some “significant” changes to its Distressed Asset Stabilization Program (DASP).
Now, investors and nonprofits that acquire the loans are required to offer borrowers principal forgiveness as a first option.
In addition, the Federal Housing Administration (FHA) will limit interest rate increases to no more than 1% per year after a five-year period when the rate is fixed – which is consistent with the Home Affordable Modification Program.
Also, effective immediately, the FHA will prohibit any purchaser of single-family mortgages under DASP from abandoning lower-value properties. This is being done in order to prevent neighborhood blight, HUD says in a press release.
What’s more, the FHA is offering greater opportunity for nonprofits to participate in DASP by allowing them to bid on a partial pool of notes – up to 5% of a national pool – and to pay the reserve price.
In addition, HUD is streamlining direct sales to interested government entities by providing new standard guidance on the sale of distressed mortgages.
“FHA is deeply committed to protecting struggling homeowners and making certain they have the greatest opportunities to avoid foreclosure and remain in their homes,” says Ed Golding, principal deputy assistant secretary for the office of housing at HUD, in a release. “While thousands of homeowners avoided foreclosure through this note sales program, 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.”
Last year, the FHA strengthened DASP to further help defaulting families still living in their homes and to allow for greater participation among nonprofit organizations. Specifically, the agency expanded a foreclosure moratorium from six to 12 months, requiring purchasers of these distressed mortgages to suspend any foreclosure action against these families.
Also, the FHA has provided more advanced notice of pending sales and extended the due diligence periods to accommodate these organizations – in addition to adding a “first look” opportunity for nonprofits to purchase vacant properties to be occupied by owner-occupants. The agency has also created specific pools of mortgages that would be exclusively offered to nonprofits and local governments.
