WASHINGTON – Dec. 4, 2012 – The U.S. Department of Housing and Urban Development (HUD) says it’s cheaper to sell Federal Housing Administration (FHA) mortgage loans in foreclosure to investors than it is to complete the foreclosure process.

In addition, HUD says investors who buy delinquent mortgages at market value can work out a deal with homeowners so they can keep the home. As a result, HUD developed the Distressed Asset Stabilization Program (DASP) as a pilot program in 2010. DASP pools at-risk mortgages into a single asset and sells them to investors.

An FHA mortgage loan servicer can put a loan into the loan pool if the:
• borrower is at least six months delinquent on the mortgage;
• servicer has exhausted all steps in the FHA loss mitigation process;
• servicer has initiated foreclosure proceedings.

If an investor buys a loan at market rate, it delays foreclosure for at least six more months.

HUD recently released the results of its first DASP bulk loan sale program, and it announced that the next round – which includes loans in Florida – would take place around March 2013. Up to 15,000 loans will be sold. In addition to Florida, auction properties are located in Georgia, California and Ohio. HUD says it will sell at least 40,000 distressed loans over the next year.

“This program accomplishes two very important objectives – it supports communities hardest hit by the housing crisis and it saves considerable money for FHA’s insurance fund,” says FHA’s Acting Commissioner Carol Galante. “The results from the September sales were strong, which tells us investors of all stripes and communities are eager for this solution.”

HUD offers two kinds of mortgage auctions. For more information, visit HUD’s Distressed Asset website.

© 2012 Florida Realtors®