Foreclosure Home News and Opinion FHA to Sell Troubled Loans in Bulk

FHA to Sell Troubled Loans in Bulk

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The Federal Housing Administration, struggling to manage a growing portfolio of delinquent home mortgages and foreclosed homes, is expanding a program to sell the loans in bulk to investors, a move  that could at least forestall foreclosure for thousands of borrowers.

The FHA, which announced the bulk  sale program on July 18, has more than 717,000 loans that are currently in default, amounting to 9 percent of the $1 trillion in loans it insures. The FHA  has faced large losses on sales of foreclosed properties. The agency will begin accepting applications for pools of thousands  of severely distressed loans this fall.

“As one step towards avoiding  unnecessary foreclosures and further stabilizing communities, we are increasing the number of loans beyond  our original goals of 5,000 per quarter to approximately 9,000 this quarter,”  said HUD Secretary Shaun Donovan in a news release. “Providing the opportunity  for borrowers to potentially stay in their home under a new sustainable  mortgage or other meaningful help not only benefits that homeowner but reduces the costs to FHA and ultimately benefits the entire community.”

Since 2010, the FHA has sold around 2,100 mortgages in a series of bulk sales, but it has yet to undertake larger sales during the current downturn.

Approximately 40 percent of the 9,000 loans in the sale scheduled for September 2012 will be located in four metropolitan  areas that are among those hardest hit by the foreclosure crisis, including Chicago, IL; Newark, NJ; Phoenix, AZ; and Tampa, FL.

Details on the Distressed Asset Stabilization Program can be found at www.hud.gov/fhaloansales.

What do you think about selling distressed loans in bulk? If the FHA’s new bulk loan sale a good idea? Or is yet another misguided government intrusion into housing?

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