HUD Program Sells Investors Pools of Troubled Loans

The U.S. Department of Housing and Urban Development is accepting applications from investors who want to buy pools of loans headed for foreclosure, which were formerly insured by the Federal Housing Administration. HUD’s Distressed Asset Stabilization Program sets out to help more home owners avoid foreclosure.

Here’s how the program works: The loans are usually sold to an investor for below the principal balance. Once the loan is purchased, foreclosure is delayed for at least six months. This allows the servicer time to find a workout with the home owner to stay in their home. If no solution can be found, the investor — or purchaser of the loan — may be able to help the home owner sell the property as a short sale.

About 3,500 loans in the HUD program will be sold in four metros hit hard by the foreclosure crisis: Chicago; Newark, N.J.; Phoenix; and Tampa, Fla.

“The housing market has momentum not seen since before the crisis,” says HUD Secretary Shaun Donovan. “But some metro areas are still under pressure and some FHA borrowers remain seriously behind on their loans and stand to lose their homes in a matter of months. … Providing the opportunity for borrowers to potentially stay in their home under a new sustainable mortgage or other meaningful help not only benefits that home owner but reduces the costs to FHA and ultimately benefits the entire community.”

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