Today, a new regulation to regulate the sale of severely overdue single-family mortgage loans guaranteed by the Federal Housing Administration (FHA) is being proposed by the U.S. Department of Housing and Urban Development (HUD). These regulations will increase the number of family-friendly affordable homes accessible and enhance community stability.
“Every day, the Biden-Harris Administration and HUD are looking for new ways to expand the availability of affordable homes for families to purchase or rent,” said HUD Acting Secretary Adrianne Todman. “This proposed rule will help struggling homeowners, stabilize neighborhoods, and make more affordable homes available for the people we serve.”
HUD has been testing note sales of past-due mortgages since 2002; under the proposed regulation, the program will move from being a demonstration to an ongoing initiative. The demonstration program under the Biden-Harris Administration, which mandated that all note sale purchasers follow mission-oriented post-sale requirements, such as giving government agencies, nonprofits, and owner-occupants a “first-look” when properties associated with the purchased notes are sold, is modified in the proposed rule.
The proposed regulation also offers parameters for direct sales of notes to such buyers, allowing HUD to continue giving nonprofits and governmental bodies priority when it comes to receiving these mortgage loans.
“Today’s proposal creates a permanent, standardized set of rules for note sales in the future that incorporates our learnings from previous sales that have taken place as part of the demonstration program,” said Assistant Secretary for Housing and Federal Housing Commissioner Julia Gordon. “The new rules underscore the importance of loss mitigation and promote owner occupancy and neighborhood stabilization.”
The program requirements included in the proposed rule are intended to ensure that the program meets its dual purpose to manage HUD’s fiduciary responsibility to the Mutual Mortgage Insurance Fund while encouraging mortgage loan outcomes that are consistent with its mission. Such outcomes include providing assistance to borrowers facing hardships, promoting the opportunity for new owner-occupants to buy foreclosed properties, encouraging the conversion of properties into affordable for sale and rental homes, and protecting neighborhoods against vacancy and blight.
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