Washington, D.C. — Today, the U.S. Department of Housing and Urban Development, or HUD, released improved guidelines for the Distressed Asset Stabilization Program, or DASP, the agency’s nonperforming loan sale program. Program improvements appear to include: a commitment to selling more loans through special pools that require investors to achieve a certain percentage of outcomes that help the surrounding neighborhood; the creation of special auctions for nonprofit bidders only; a 12-month foreclosure moratorium on all loans sold through the program; higher standards for loan modifications; improved reporting requirements; and a 20-day first look period during which owner occupants, government entities, and nonprofits have the opportunity to buy a real estate owned property before an investor may bid.
Julia Gordon, Senior Director of Housing and Consumer Finance at American Progress, issued the following statement:
In response to concerns about the DASP program voiced by community stakeholders and housing advocates, HUD has taken significant steps to strengthen the note sales program in numerous areas. Notably, the agency is making auctions more accessible to mission-based nonprofits, selling more loans through the neighborhood stabilization outcome auctions—which appear to have better results for communities—and requiring better loan modifications.
More information is needed to understand the extent to which these new guidelines will help ensure that these sales benefit not just the agency, but also homeowners and neighborhoods. Most importantly, HUD should clarify that it plans to require all investors to attempt to keep homeowners in their homes before pursuing other alternatives. Additionally, HUD should reconsider its decision to permit private investors to receive credit for flipping loans to neighborhood organizations at a profit.
In February 2015, CAP joined a letter, sent to Biniam Gebre, then-commissioner of the Federal Housing Administration, or FHA, that outlined a list of recommendations to improve DASP.
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