WASHINGTON – The U.S. Department of Housing and Urban Development has made significant changes to its Distressed Asset Stabilization Program (DASP) that will require loan servicers to take additional steps before initiating residential mortgage foreclosures.
HUD said that in an effort to better serve homeowners looking to avoid foreclosure, loan servicers will now be required to delay foreclosure for a year and to evaluate all borrowers for the Home Affordable Modification Program (HAMP) or a similar loss mitigation program. HUD is making additional improvements to the Neighborhood Stabilization Outcome (NSO) sales portion of the Distressed Asset Stabilization Program which are aimed at increasing non-profit participation.
Updates include giving non-profits a first look at vacant properties, allowing purchasers to re-sell notes to non-profits, and offering a non-profit only pool.
Previously, loan servicers could foreclose 6 months after they received the loan and were encouraged, though not required to assess a borrower’s qualifications for loss mitigation programs. Purchasers of the geographically targeted neighborhood stabilization pools have always been required to ensure that at least 50 percent of the loans in a pool achieve outcomes that help areas hardest hit by foreclosure avoid the neighborhood decline associated with numerous vacant properties.
“These changes reflect our desire to make improvements that encourage investors to work with delinquent borrowers to find the right solutions for dealing with the potential loss of their home and encourage greater non-profit participation in our sales,” said Genger Charles, acting general deputy assistant secretary in the Office of Housing. “The improvements not only strengthen the program but help to ensure it continues to serve its intended purposes of supporting the MMI Fund and offering borrowers a second chance at avoiding foreclosure.”
All of these changes will be subject to stronger reporting requirements including tougher penalties for not complying with quarterly reporting responsibilities and a new requirement to report on borrower outcomes, even when a note is sold after the original purchase.
HUD plans to hold its first sale of 2015 in June.
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