HUD Archives: News Releases

HUD TO HOLD FIRST SINGLE-FAMILY LOAN SALE UNDER THE ACCELERATED CLAIM DISPOSITION DEMONSTRATION INITIATIVE

WASHINGTON - Housing and Urban Development Assistant Secretary for Housing - Federal Housing Commissioner John C. Weicher said today that the first single-family loan sale under the Accelerated Claim Disposition Demonstration initiative will take place on October 22.

"This demonstration initiative is designed to increase financial recoveries to the FHA insurance fund. In the demonstration, loans that are almost certain to be foreclosed will be sold to a Joint Venture partnership, which will be managed by a private-sector entity. The entity will decide on the most financially viable option to dispose and/or restructure the loans, which may enable some families to remain in their homes."

HUD anticipates that the portfolio will contain 4,000-6,000 mortgages with a total unpaid principal balance between $300-$500 million.

The demonstration project provides HUD with greater flexibility for modifying the single-family claim and property disposition process and maximizes recoveries on claims paid.

HUD will use its new authority to:

• Pay claims based upon assignment of the mortgage, rather than upon conveyance of the property;

• Transfer assigned mortgage loans to private parties for servicing, restructuring, foreclosure, property management; and asset distribution; and

• Enter into joint ventures with private entities for asset disposition.

HUD hopes to achieve several goals by implementing the program. They include: shortening the time in which servicers can file a claim for default; addressing defaults by aligning private sector interests with HUD's objectives; reducing HUD's Real Estate Owned portfolio; and increasing the value of single-family assets and recovery to HUD.

Under the terms of the Federal Housing Administration's (FHA) upcoming sale, SFJV-2002, FHA will sell a majority interest in a public/private joint venture formed to acquire, service and dispose of a portfolio of defaulted mortgage loans. These loans are secured by single-family properties located in either HUD's Philadelphia or Atlanta Homeownership Center. The joint venture will be formed as a Delaware LLC in which HUD and its private partner will be the members. The private partner will serve as the LLC manager, and will be responsible for servicing and asset disposition.

HUD will offer for sale a membership interest in the LLC, which will, in turn, purchase a loan portfolio together with a pipeline of defaulted, formerly FHA-insured, single-family mortgages that meet specific eligibility criteria. The successful bidder will be the private concern whose bid, submitted by the October, 2002, due date, maximizes the capitalized value of the LLC.

FHA is maintaining a website for up-to-date information regarding the loan sales program.

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Content Archived: April 9, 2010