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HUD: Loan Sales Cut Insurance Losses, Reduced Foreclosures

money-life-preserverThe U.S. Department of Housing and Urban Development (HUD) announced in a report released last week it has sold $15.8 billion in nonperforming loans since 2010, cutting losses to its insurance fund and saving thousands of homeowners from foreclosure.

Since the inception of the Single-Family Loan Sale (SFLS) program four years ago, HUD has sold approximately 91,000 loans for a total of about $15.8 billion through the program, according to the agency. Of those 91,000 loans sold, approximately 38,000 had been sold through the second quarter of 2013. About half of those 38,000 had been resolved as of Q2 2013, meaning they were either foreclosed upon or reached some other solution and are no longer nonperforming loans. Last week's report was the first assessment released by HUD regarding the sales through the SFLS program.

HUD stated in the report that foreclosure was averted in about 34 percent (about 6,400) of those loans that were resolved, and that those properties would have been foreclosed upon had it not been for the sale of those loans. The report also said that 11 percent (2,100) of those 19,000 resolved loans were fully re-performing, meaning the borrowers remained in their homes.

"The SFLS program is also proving to be a preferred alternative for borrowers than REO," the report stated in its key findings section. "Unlike REO, where foreclosure is a required first step, the SFLS program provides an opportunity for borrowers to avoid foreclosure."

The report said overall losses to HUD's MMI (Mutual Mortgage Insurance) fund had fallen from 63.5 percent in the first quarter of 2010, when the SFLS program began, down to 52.9 percent in Q2 2014.

The agency said in the report that the SFLS program is "meeting its intended goal of minimizing losses to the MMI fund, and as a result, reducing risk to taxpayers."

The sale of loans through the SFLS program has picked up in the last two years after starting slowly. Through Q2 2012, only 2,055 loans had been sold; from Q3 2012 to Q2 2013, almost 36,000 were sold, according to HUD.

The five states with the highest number of loans sold through SFLS since 2010 were Florida (13,852), New Jersey (9,919), Illinois (8,357), New York (5,951), and Ohio (5,124). Lone Star Funds has purchased the most loans of any other purchaser with 22,558.

About Author: Brian Honea

Brian Honea's writing and editing career spans nearly two decades across many forms of media. He served as sports editor for two suburban newspaper chains in the DFW area and has freelanced for such publications as the Yahoo! Contributor Network, Dallas Home Improvement magazine, and the Dallas Morning News. He has written four non-fiction sports books, the latest of which, The Life of Coach Chuck Curtis, was published by the TCU Press in December 2014. A lifelong Texan, Brian received his master's degree from Amberton University in Garland.
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