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HUD SAVES $34 MILLION UNDER PROGRAM TO ACCELERATE CLAIMS PROCESS
WASHINGTON - Assistant Secretary for Housing/ Federal Housing Commissioner John C. Weicher announced today that 5,100 mortgages - representing $468.4 million in unpaid principal - were sold at HUD's first single-family loan sale using its new Accelerated Claim Disposition (ACD) demonstration initiative. The sealed-bid auction took place October 29 via HUD's electronic bid site.
"This demonstration initiative is designed to increase financial recoveries to the FHA insurance fund," explained Weicher. "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 estimated that the success of this project could save the Government approximately $34 million. "This is a good opportunity for the Department to enter into a public/ private partnership, one that will benefit HUD financially and in many cases could enable families to remain in their homes," added Weicher.
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 says it will use its new authority to
HUD hopes to achieve several goals through 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.
The ACD program was authorized in the Department's fiscal year 1999 appropriations bill, which gave HUD greater flexibility in choosing how to pay insurance claims and dispose of acquired notes and properties. A specified number of FHA servicers, called participating servicers, have been selected by HUD to submit defaulted single-family loans to the Department for payment of an accelerated claim. These participating servicers include: Countrywide Home Loans, Wells Fargo Home Mortgage, Cendant Mortgage Corporation and Chase Manhattan Mortgage Corporation.
The winning bidder, Salomon Brothers Realty Corp., will acquire a 70 percent equity share in a public/ private joint venture formed to acquire, service and dispose of a portfolio of single-family, FHA-insured loans that are in foreclosure or almost certain to be foreclosed. The loans are secured by properties located within the jurisdiction of HUD's Philadelphia and Atlanta Homeownership Centers.
Under the terms of the sale, a joint venture will be formed as a Delaware limited liability company (LLC) in which HUD and Salomon Brothers will be the members. Salomon Brothers will serve as the LLC manager, and will be responsible for servicing and asset disposition. They will determine the most financially viable options of either disposing of the loans, or restructuring them.
HUD's Loss Mitigation program helps homeowners avoid foreclosure. Under the program, lenders have options that can help many keep their homes. Loss Mitigation incentives include payment workouts, mortgage modifications, and "partial claims" (where FHA pays the lender the amount delinquent and takes back an interest-free note from the homeowner). Other options are also available if the homeowner does not have the financial resources to retain the home.
HUD is the nation's housing agency committed to increasing homeownership, particularly among minorities, creating affordable housing opportunities for low-income Americans, supporting the homeless, elderly, people with disabilities and people living with AIDS. The Department also promotes economic and community development as well as enforces the nation's fair housing laws. More information about HUD and its programs is available on the Internet.
Content Archived: April 9, 2010