The U.S. Department of Housing and Urban Development (HUD) has proposed a new rule to govern the sale of seriously delinquent single-family mortgage loans insured by the Federal Housing Administration (FHA). The aim is to expand affordable housing options and enhance community stability.
"Every day, the Biden-Harris Administration and HUD are looking for new ways to expand the availability of affordable homes for families to purchase or rent," said HUD Acting Secretary Adrianne Todman. "This proposed rule will help struggling homeowners, stabilize neighborhoods, and make more affordable homes available for the people we serve."
Assistant Secretary for Housing and Federal Housing Commissioner Julia Gordon added, "Today’s proposal creates a permanent, standardized set of rules for note sales in the future that incorporates our learnings from previous sales that have taken place as part of the demonstration program. The new rules underscore the importance of loss mitigation and promote owner occupancy and neighborhood stabilization."
Since 2002, HUD has tested note sales of delinquent mortgages through a demonstration program. The proposed rule transitions this initiative into a permanent program. Changes under the Biden-Harris Administration required note sale purchasers to follow mission-oriented post-sale requirements, including offering a “first-look” to owner-occupants, nonprofit organizations, and government entities when selling properties associated with purchased notes.
The proposed rule aims to prioritize awarding mortgage loans to nonprofit organizations and governmental entities while providing guidelines for direct sales of notes to such buyers. Program requirements intend to balance HUD's fiduciary responsibility to the Mutual Mortgage Insurance Fund with its mission-driven goals. These include assisting borrowers facing hardships, promoting opportunities for new owner-occupants to buy foreclosed properties, converting properties into affordable homes for sale or rent, and protecting neighborhoods from vacancy and blight.
HUD is seeking public comments on its proposal through methods outlined in its notice by September 16, 2024.
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