The U.S. Department of Housing and Urban Development (HUD) announced changes to an FHA program April 24 that would delay loan servicers from initiating foreclosure actions for at least a year on delinquent borrowers, and mandate that all such borrowers be evaluated for the Home Affordable Modification Program or other loss mitigation program.
The FHA’s Distressed Asset Stabilization Program (DASP), which was resumed in 2010, helps mortgages headed towards foreclosure to be sold to qualified bidders. The program also encourages servicers to work with borrowers to bring the loan out of default.
Previously, servicers could foreclose six months after receiving the loan, and were encouraged, although not mandated, to work with borrowers to get them into loss mitigation programs. HUD is making additional improvements to the Neighborhood Stabilization Outcome (NSO) sales portion of DASP, which are aimed at increasing non-profit participation. Updates include giving non-profits a first look at vacant properties, allowing purchasers to re-sell notes to non-profits, and offering a non-profit-only pool.
“These changes reflect our desire to make improvements that encourage investors to work with delinquent borrowers to find the right solutions for dealing with the potential loss of their home and encourage greater non-profit participation in our sales,” said Genger Charles, acting general deputy assistant secretary of the HUD Office of Housing. “The improvements not only strengthen the program, but help to ensure it continues to serve its intended purposes of supporting the MMI Fund and offering borrowers a second chance at avoiding foreclosure.”
HUD also announced that enhanced reporting requirements will be included as part of the program, which includes tougher penalties for not complying with the department’s quarterly reporting responsibilities or requirement to report on borrower outcomes.
HUD intends on holding its first sale under the program in June.