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Published July 18, 2024
The U.S. Department of Housing and Urban Development (HUD) has announced a proposal to establish a permanent program for selling seriously delinquent mortgages insured by the Federal Housing Administration (FHA). This initiative aims to solidify an existing temporary measure, enhance the Mutual Mortgage Insurance Fund, and promote affordable housing.
Since 2002, HUD has conducted sales of delinquent mortgage notes, including forward loans and home equity conversion mortgages (HECMs), on a trial basis. These sales have been instrumental in maximizing recoveries and bolstering the Mutual Mortgage Insurance Fund, which insures loans from FHA-approved lenders. The proposed rule seeks to transition these sales from a temporary program to a permanent policy, to be known as the Single Family Sale Program.
The new rule includes several changes to the demonstration program. Notably, purchasers of loan notes will be required to follow post-sale requirements aligned with HUD's mission of fostering affordable and sustainable communities. One key requirement is offering a "first look" to potential owner-occupants, nonprofits, and government entities when selling properties linked to the purchased notes. Additionally, HUD will prioritize nonprofits and government entities when awarding these mortgages.
“Every day, the Biden-Harris Administration and HUD are exploring new ways to increase the availability of affordable homes for families to purchase or rent,” said Adrianne Todman, Acting Secretary of HUD. “This proposed rule will help struggling homeowners, stabilize neighborhoods, and make more affordable homes available for the people we serve.”
Julia Gordon, Assistant Secretary for Housing and Commissioner of the FHA, added, “Today’s proposal creates a permanent, standardized set of rules for note sales in the future, building on the lessons learned from previous sales conducted under the demonstration program. The new rules emphasize the importance of loss mitigation and support owner occupancy and neighborhood stabilization.”
HUD is inviting public comments on the new proposal, which can be submitted by mail or electronically by September 16.