More than $1.9 billion in distressed government-insured mortgages have been sold through a program that targets hard-hit real estate markets. One of the successful bidders was a nonprofit community development financial institution in the Garden State.
The Distressed Asset Stabilization Program was announced by the Department of Housing and Urban Development in June. The program, which uses a competitive bidding process, was an expansion of a 2010 pilot program that resulted in the sale of more than 2,100 distressed loans insured by the Federal Housing Administration.
Investors agree to acquire FHA loan pools at market prices, usually at a discount, and help bring the loans out of default through affordable mortgage solutions, like loan modifications or short sales, or achieve a favorable resolution. Eligible borrowers must be at least six months’ past due, unqualified for all steps in FHA’s loss mitigation process, and in the process of foreclosure.
In July, HUD announced that 9,000 FHA loans were scheduled for sale in September.
On Monday, HUD said it is accelerating the use of the sale of severely delinquent mortgages through the program.
The government agency confirmed that the sale took place as scheduled, with 5,300 non-performing loans for $950 million in six pools sold on Sept. 12.
Another 4,100 loans for $770 million sold on Sept. 27. These loans were secured by properties in areas designated for Neighborhood Stabilization Outcome pools. Targeted metropolitan statistical areas included Chicago; Newark, N.J.; Tampa, Fla.; and Phoenix.
New Jersey Community Capital issued a statement Tuesday indicating that it was selected to purchase 399 distressed mortgages secured by properties in New Jersey and Florida. The nonprofit community development financial institution said the program will be administered through its newly created National Community Capital.
The New Jersey Community Capital transaction was financed by Prudential Financial, Inc., MetLife and Newport Capital Bancorp.
“This program accomplishes two very important objectives– it supports communities hardest hit by the housing crisis and it saves considerable money for FHA’s insurance fund,” Acting Federal Housing Commissioner Carol Galante said in a statement. “The results from the September sales were strong which tells us investors of all stripes and communities are eager for this solution.”
Another 10,000 to 15,000 loans, including assets in Neighborhood Stabilization Outcome areas, are expected to be sold in two parts during the first quarter of next year. Targeted communities are in California, Florida, Georgia and Ohio.
Total sales are expected to exceed 40,000 over the next year.
