Cummings, Brown Seek Information from HUD About Protections for Vulnerable Homeowners

Washington, DC – February 3, 2016 – (RealEstateRama) — Rep. Elijah E. Cummings, Ranking Member of the House Committee on Oversight and Government Reform, and Sen. Sherrod Brown, Ranking Member of the Senate Committee on Banking, Housing, and Urban Affairs, sent a letter requesting information from the Department of Housing and Urban Development (HUD) about the Distressed Asset Stabilization Program and the loss mitigation options available to homeowners whose loans are sold through the program.

“Several recent reports indicate that the Federal Housing Authority (FHA) may be selling nonperforming loans for properties located in some of our most vulnerable communities to hedge funds and private equity firms via quarterly auctions without sufficient protections for homeowners and neighborhoods,” Cummings and Brown wrote.
In 2010, HUD began selling pools of distressed single-family home mortgages at auction through the Distressed Asset Stabilization Program. Under HUD’s requirements, all mortgages sold through the program must have exhausted all available loss mitigation options. However, recent reports suggest that some mortgages may have been sold through the program before all available loss mitigation measures had been exhausted.

Media reports indicate that the program may not be effectively incentivize servicers to modify the mortgages they purchase to benefit homeowners in the loan pool and that some entities that have purchased loan pools through the program may be singularly interested in foreclosing on the properties whose mortgages they have purchased.

“Without the borrower protections guaranteed by HUD, borrowers whose mortgages are sold can be offered modifications that do not yield affordable payments or are not sustainable over the longer term,” Cummings and Brown wrote.
News reports indicate that one firm, Caliber Home Loans, provided mortgage modifications to homeowners in its purchased loan pools in the form of balloon payment mortgages—the same types of mortgages that had already proven to be unaffordable.

Cummings and Brown are seeking the requested information by February 29, 2016, including whether HUD requires notice to homeowners that their mortgages are being sold through this program; how HUD ensures loss mitigation procedures are followed for mortgages prior to their sale; what protections are given to homeowners after their mortgages have been sold; what data HUD provides to the public about the loans sold through the program; and what percentage of loan pools are sold to non-profits.

To read the full letter, click here.