How Auctioning Troubled Mortgages Can Boost the Housing Recovery

Sarah Edelman and Julia Gordon write that auctioning FHA-insured delinquent loans could aid the recovery of the housing market.

While the worst of the foreclosure crisis is over, nearly two million homeowners remain behind on their mortgages and on their way to foreclosure unless they receive assistance. Close to 10 million moreare underwater on their mortgages, heightening their risk of losing their homes in the future.

Many of those troubled homeowners have Federal Housing Administration-insured mortgages, but the FHA’s servicers have not been able to provide all of those homeowners with assistance. In response to this glut of delinquent mortgages, the FHA in 2012 began selling distressed loans in bulk prior to foreclosure. The Distressed Asset Stabilization Program, aimed at helping the agencies save money and potentially providing borrowers with a last chance to save their homes, has auctioned about 100,000 loans to private investors over the past two years. The FHA still insures about a half million seriously delinquent loans that could be eligible for the program.

The above excerpt was originally published in BankThink. Click here to view the full article.

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