HUD says $15.8bn sale of faulty loans will prevent foreclosures

by Ryan Smith02 Sep 2014
The Department of Housing and Urban Development’s sales of $15.8 billion in nonperforming loans will help stop foreclosures for about 6,400 homeowners, according to the agency.

HUD has sold more than 91,000 loans – including almost 53,000 this year alone, according to a Bloomberg report. As of May, half of the 38,000 loans sold last year were resolved – meaning they are no longer considered nonperforming because of foreclosure or some other outcome – and in 34% of those cases, the property wasn’t seized, according to a HUD report.

“Without the note sale program, all of these loans would be foreclosed upon,” the report stated. The “program is achieving its anticipated goal of minimizing losses,” it said.

HUD began selling pools of delinquent loans in 2010 to cut losses to the Federal Housing Administration’s mortgage insurance fund, according to Bloomberg. The loans averaged 31 months of delinquency, “meaning these borrowers are destined for foreclosure,” the report stated. Since late 2012, HUD has placed a six-month restriction against foreclosure actions on loans it sold.

Cutting its insurance losses has been a grim necessity for the agency. Last year, losses of more than $50 billion resulting from the housing meltdown forced HUD to take a $1.7 billion cash infusions from the Treasury – the first taxpayer subsidy in the agency’s history, Bloomberg reported.
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