This program is not quite the same bulk sale program being offered by the Federal Housing Finance Agency (FHFA) and the government sponsored enterprises (GSE), Fannie Mae and Freddie Mac. The DASP is a “paper sale” where FHA sells the loans, in bulk, to investors in a competitive bid process. The loans can only be sold after the borrower has gone through the entire FHA loss mitigation process. Prior to the formal foreclosure proceeding the loans are sold to investors. The Foreclosure is delayed for at least six months while the investor attempts a work out with the borrower (short sale, loan modification, etc.).
As many as half of the loans sold are retained by the investor if there is not a work out to avoid flooding local markets. FHA initially hoped to sell 5,000 loans quarterly.
FHA Commissioner Carol Galante hosted an industry conference call to announce that HUD is accepting applications for entities to purchase the troubled loans. The original goal of 5,000 has been increased to 9,000 for this quarter (and is expected to remain near the 9,000 level in subsequent quarterly sales).
In addition to the standard program, an enhanced program features community stabilization requirements to encourage investment in the hardest hit communities. HUD is offering to sell “subpools” to local governments and organizations to further the goal of neighborhood stabilization. Approximately 3,500 loans will be sold in Chicago, Newark, Phoenix, and Tampa.
NAR’s position on bulk sales is that they should be offered if it’s necessary. However, such sales should be done only when necessary and with program requirements that protect neighborhoods and communities. We will continue to monitor the DASP and provide feedback and recommendations to HUD as appropriate. If you have questions, please do not hesitate to contact NAR.