In the latest effort to reduce the foreclosure backlog and help homeowners stay in their homes, the Federal Housing Administration (FHA) is reaching out to investors.
The agencys new Distressed Asset Stabilization Program
will help homeowners avoid foreclosure
by selling troubled loans to investors willing to abide by the program rules.
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Over 9,000 FHA loans at risk of foreclosure willtransfer
to qualified winning bidders. Approximately 3,000 to 4,000 of these loans are located in Chicago, Phoenix, Newark and Tampa, with the remaining loans scattered throughout the country. Since the program was launched in June 2012, investor interest
has expanded, which is prompting the FHA to offer a larger number of distressed properties during their next sale.
Investors who are willing to sign a confidentiality agreement
and meet the programs strict guidelines
can get an opportunity to bid on loans.
They must also agree to delay foreclosure
for an additional six months, while they work with the occupant to prevent the misfortune from occurring. To avoid compounding financial problems, the program requires investors have at least $5 million in capital
before they can bid.
How the Program Helps Homeowners
If your delinquent mortgage is part of the Distressed Asset Stabilization Program, you have a second chance to avoid foreclosure
and remain in your home. Because the program is specifically designed to reduce the number of REOs
and foreclosures on the market, investors are required to make foreclosure prevention a priority, and can allow no more than 50 percent of their loans
to fall into REO status. This puts added pressure on them to utilize all of the foreclosure prevention programs available to keep you in your home.
These programs include:
- Loan modifications
- Deeds-in-lieu (with leasebacks to the owner)
- Short sales to owner occupants
- Sale to approved Neighborhood Stabilization Program (NSP) grantees
If after exhausting all of these options, the investor is still unable to avoid foreclosure, the FHA will require them to rent the property for three years.
And, because most of these investors arent in the rental business, this is a last resort that they want to avoid.
Under the Distressed Asset Stabilization Program,
your mortgage will not succumb to foreclosure until youre at least six months delinquent,
and the servicer has exhausted every option available to help you keep your home. If nothing else, this will buy you time to correct
your mortgage delinquency and avoid default.
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