Written By: Glenn Michaels, Op-Ed Writer
On Friday, April 24, 2015 HUD announced some significant changes to its Distressed Asset Stabilization Program (DASP). These changes were made in an effort to better serve homeowners looking to avoid foreclosure, loan servicers will now be required to delay foreclosure for a year and to evaluate all borrowers for the Home Affordable Modification Program (HAMP) or a similar program. 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 notes to non – profits, and offering a non – profit only pool.
Previously, loan servicers could foreclose 6 months after they received the loan and were encouraged, though not required to assess a borrower’s qualifications for loss mitigation programs. Purchasers of the geographically targeted neighborhood stabilization pools have always been required to ensure that at least 50 percent of the loans in a pool achieve outcomes that help areas hardest hit by foreclosure avoid the neighborhood decline associated with numerous vacant properties.
These changes reflect HUD’s desire to make improvements that encourage investors to work with delinquent borrowers 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 HUD’s sales. The improvements not only strengthen the program but help to ensure it continues to serve its intended purposes of supporting MMI Fund and offering borrowers a second chance at avoiding foreclosure.
All of these changes will be subject to stronger reporting requirements including tougher penalties for not complying with quarterly reporting responsibilities and a new requirement to report on borrower outcomes, even when a note is sold after the original purchase.
HUD plans to hold its first sale of 2015 in June.
Distressed Asset Stabilization Program : FHA’s note sales program was resumed in 2010 as a direct sale pilot program that allows pools of mortgages headed for foreclosure to be sold to quailed bidders and encourages to work with borrower to help bring the loan out of default. In many cases, this is a less expensive alternative to foreclosure and sale as a real estate – owned (REO) property. An FHA servicer can place a loan into loan pool if the following criteria are met:
The borrower is at least six months delinquent on their mortgage
The servicer has exhausted all steps in the FHA loss mitigation process
In 2012 the seriously delinquent FHA loans were pooled and sold for the first time and HUD announced that these sales would be ongoing. In some cases if the borrower and the servicer cannot come to an agreement the property can be held as a rental property for a period of three (3) years to assist in the stabilization of an area.
When these loans go up for sale they are sold as a “National Sale” with loans drawn from diverse areas of the country and from certain geographic areas to stabilize areas.
About The Author
Glenn Michaels - As an op-ed writer, Glenn Michaels is a mortgage underwriting instructor for CampusUnderwriter (www.MortgageUnderwriter.org). As a BBA & FHA DE Underwriter, Glenn is a Pace University graduate who also graduated from New York University’s School of Mortgage Finance. Glenn has conducted numerous training classes and has worked in the mortgage banking industry for 38 years.