By REGINA CORCORAN Citizen Columnist
Here is a new acronym for everyone: DASP. That is, of course, short for HUD's Distressed Asset Stabilization Program.
FHA started selling nonperforming mortgages in September. Think of it as, "yes, I will take your dog for my two cats."
HUD expects to sell 40,000 distressed loans over the next year. What constitutes a distressed loan? The borrowers are at least 90 days delinquent.
FHA was as happy as a Christmas elf in a Toys R Us store with the first sale. It took place in two parts. One part included 4,100 mortgages in seven different "Neighborhood Stabilization Outcome" (or NSO's) pools, totaling $770 million in unpaid principal balances.
NSO loans are secured by properties in certain geographical areas such as Phoenix, AZ, Tampa, FL, Chicago, IL and Newark, NJ.
The other part of the sale package included 5,300 nonperforming loans in six different national pools with unpaid loan balances of $950 million.
FHA acting Commissioner, Carol Galante reported that "investors of all stripes and communities are eager for this solution."
The question that came to my mind was, what do you do with a nonperforming mortgage and who would want to own one? Yet, I guess dumpster divers come in all forms.
For example, New Jersey Community Capital (NJCC) purchased a pool of 399 of the delinquent loans.
Since they get to buy them for cents on the dollar, they can try to arrange a modification agreement with the borrowers. They can "write down" the loan balance. That way, the borrowers' monthly payment may be only 55% of what it formerly was.
NJCC President Wayne Meyer says a mortgage balance of $313,000 may be reduced to only $146,000.
If the borrowers still can't afford the mortgage payments, NJCC will offer to rent the property to them.
Failing that, they will be given a nine-month window before NJCC forecloses.
HUD issues stipulations. For the NSO loans, HUD says that the new investors may not repossess more than 50% of the loans.
Those who purchase the national pools, however, don't have that limitation. However, they must wait at least six months before resuming the foreclosure process, That produces their incentive to try to cure the delinquent mortgage.
Three more bits of Holiday Joy come from Freddie Mac and Private Mortgage Insurance Companies.
Freddie Mac reported that they will suspend evictions of foreclosed, owner-occupied single family and 2-4 unit properties between Dec 19, 2012 through Jan 2, 2013.
In addition, those in the Hurricane Sandy disaster areas are on a 90-day eviction suspension holiday that will run through February 2013.
In addition, nine of the largest private mortgage insurance companies have agreed to forego prior approval of short sales and deeds in lieu of foreclosure for mortgages owned or backed by Fannie Mae and Freddie Mac.
That saves Fannie, Freddie and potential short sale sellers and buyers additional costs, delays and uncertainties associated with the additional step of approval by the mortgage insurance companies.
It will also prevent a number of properties from slipping from short sale status to foreclosure.
What do you think?
Regina E. Corcoran, SRA.
Florida Real Estate Broker
State Cert. Residential Appraiser
State Cert. Residential Contractor
President, AmeriRealty Corp.
Vice-president, AmeriMortgage Corp.