The Department of Housing and Urban Development is auctioning off government-insured mortgages this summer. The sales are likely to involve more than $3 billion in distressed home loans.
HUD plans to sell 20,000 distressed mortgages that are insured by the Federal Housing Administration. The sales are being conducted through the expanded Distressed Asset Stabilization Program.
Loans up for bid are at least six months past due, and the servicers have exhausted all steps in the FHA loss mitigation process. In addition, foreclosure proceedings have already been initiated.
Investors who acquire the loans are required to delay foreclosure for at least six months during which time the new servicer works with the borrower to find an affordable foreclosure alternative.
The upcoming two sales will occur through two auctions. The first will take place on June 26 and will involve the sale of around 15,000 loans. The second sale of 5,000 notes will happen on July 10.
The loans are backed by properties in North Carolina, Southern California, Southern Ohio and Chicago.
HUD says that the sales are part of a broader effort to address shadow inventory and target relief to high-foreclosure areas.
In addition, the sales will increase recoveries to FHA’s Mutual Mortgage Insurance Fund.
HUD conducted two prior auctions through the Distressed Asset Stabilization Program in March. The first involved 12,476 non-performing loans with a combined unpaid principal balance of $2.2 billion, and the second was 4,000 loans for $0.635 billion.
The average loan amount for the March sales was $172,068. If the average loan is the same size in this summer’s sales, then the total balance of the loans involved is likely to be around $3.4 billion.
Federal Housing Commissioner Carol Galante noted in the announcement that there has been “tremendous response” to the note sales.
More than 40,000 distressed loan are expected to be sold this year through the program.
