July 6, 2016
The FHA has announced changes to its Distressed Assets Stabilization Plan that would “have purchasers of severely delinquent mortgages offer qualified borrowers principal reductions and protection from payment shock,” according to the official site.
An FHA press release states, “Certain families with distressed mortgages insured by the Federal Housing Administration (FHA) may soon be eligible for a reduction of their outstanding loan amounts should their mortgages be sold through DASP” and steps are being taken to prevent blighted neighborhoods.
“FHA’s latest enhancements prohibit investors from abandoning low-value properties in high-foreclosure neighborhoods to prevent blight. FHA is also offering greater opportunity for non-profit organizations, local governments and other governmental entities to participate in DASP. Loans are not eligible to be sold through DASP unless and until all FHA loss mitigation efforts are exhausted.” The press release states that mortgages sold through this program are on average, roughly 29 months delinquent at auction time.
“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, HUD’s Principal Deputy Assistant Secretary for the Office of Housing, who is quoted in the press 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.”
The enhanced FHA program includes the following features, as mentioned on the FHA official site:
–Principal Reduction/Capital Arrearage Forgiveness – Principal forgiveness is the first option investors must consider offering to borrowers when evaluating them for a modification.
–Payment Shock Protection – FHA will limit interest rate increases to no more than one percent per year after a five-year period where the rate is fixed; this is consistent with the Home Affordable Modification Program (HAMP).
–Walk-Away Prohibition – Effective immediately, FHA will prohibit any purchaser of single-family mortgages under DASP from abandoning lower value properties in order to prevent neighborhood blight.
–Alternative Bidding for Non-Profit Buyers – This enhancement will allow qualified non-profit organizations to bid on a partial pool of notes up to five percent of a National Pool and to pay the reserve price. This alternative offers another opportunity for non-profit organizations and local governments to participate in DASP along with those announced last year (non-profit/government-only NSO pools and direct sales offerings).
You can learn more about the enhanced Distressed Assets Stabilization Program at FHA.gov.
Do you work in residential real estate? You should know about the free tool offered by FHA.com. It is designed especially for real estate websites; a widget that displays FHA loan limits for the counties serviced by those sites. It is simple to spend a few seconds customizing the state, counties, and widget size for the tool; you can copy the code and paste it into your website with ease. Get yours today:
http://www.fha.com/fha_loan_limits_widget
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.
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