FIGHTING FOR HOUSING JUSTICE IN ATLANTA
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HUD National Day of Action!
September 9, 2014 · 12:00 pm · 12:45 pm
HUD Atlanta Regional Office, Five Points Plaza Building 40 Marietta Street Atlanta, GA 30303
HUD’s Distressed Asset Stabilization Program (DASP) has opted to sell distressed mortgages guaranteed by the Federal Housing Administration to private investors with NO STRINGS attached. While HUD is in a position to facilitate purchases to nonprofits who will work to keep families in their homes, they are selling to profit-driven private equity, which can quickly foreclose on the home, kick families out, and make big money off turning the home into a rental or selling it off. On SEPTEMBER 9 housing justice activists in several cities will deliver letters to HUD offices around the country in order to force the agency to create and enforce necessary requirements on any buyer of distressed assets so that homeowners and renters are protected.
The market for defaulted mortgages is heating up as Wall Street firms try to profit from the housing recovery. The $3.9 billion HUD offer in June was the most competitive to date, drawing more buyers and bids than previous sales and setting off a flurry of auctions last month. Dallas-based Lone Star Funds, the distressed-debt investment firm founded by Dallas billionaire John Grayken, paid almost 66 cents per dollar of unpaid balance at the June HUD auction, winning bids on all 16 loan pools. Lone Star sold securities backed by delinquent loans this year and like similar companies, they may plan to build home-rental businesses using profits from the resale of the nonperforming loans to expand their property holdings.
HUD views the sales of distressed home loans as less expensive than the foreclosure and sale of these properties as HUD real estate owned (REO). The agency has marketed the DASP program as both cost saving to the taxpayer and—remarkably—as a benefit for the families who hope to hold onto these properties. Because HUD is selling pools of notes at a “competitively-determined price below the unpaid balance of the underlying loans,” the agency thinks investors will be able to help homeowners in ways that are “unavailable” to the FHA, which maintains its no principle reduction policy. According to the HUD Asset Sales website: “Selling the notes through the DASP program . . . injects new ownership who may be able to work with the borrowers to find a solution that allows them to remain in their homes. The DASP sales agreements call for a delay in foreclosure of six months, during which time it is anticipated that the new owner will have an opportunity to work with the borrower to find a sustainable solution to avoid foreclosure. Because the loans are sold without FHA insurance, the new owner has complete flexibility in taking loss mitigation actions. These actions may include principal reductions.” While several strategies to help homeowners are suggested here, there is no plan for investor oversight by HUD and no recognition that private buyers have NO INCENTIVE to rework the mortgages and make them more affordable.
Rather than deliver on yet another empty promise to help struggling homeowners, HUD’s DASP program passes the buck, placing the responsibility for homeowner recovery in the hands of a profit-driven, private market. Since 2010, HUD has sold 101,290 distressed home loans with a combined unpaid balance of $17.6 billion in more than a dozen auctions. HUD plans at least one more sale in 2014 and one sale per quarter in coming years. Recently, Freddie Mac, the giant mortgage finance firm that operates under government control, also got into the act when it sold $659 million worth of troubled mortgages. For mutual funds and other institutional investors, the appeal of these bonds is obvious. They have yields of about 4 percent and pay out quickly — often in just two years — if the foreclosure process on the loans in the portfolio goes smoothly. The yields look enticing compared with the current 2.42 percent yield on a 10-year Treasury note. The market for these bonds is still small when compared with the heyday of the mortgage-backed securities market before the financial crisis, but the demand is expected to grow as institutional investors search for higher yield investments. Analysts estimate that there are still some $660 billion worth of delinquent mortgages in the United States.
Housing justice activists are troubled that one of the biggest sellers of distressed mortgages to private equity is a U.S. Government housing agency that COULD facilitate affordable housing. Those familiar with the operations of private equity fear that struggling homeowners with FHA insured loans could see accelerated foreclosure and eviction proceedings after their loan has been sold to these companies, particularly in non-judicial foreclosure states like Georgia. Profit-driven firms are more likely to re-sell the loans or vacate the properties for more lucrative uses than to use principle reduction to make these loans more affordable for families.
Join OOHA as we deliver a petition HUD office in Atlanta on SEPTEMBER 9 to ask the agency to reform the Distressed Asset Stabilization Program to keep families in their homes! Meet us at the OOHA office in the AFSC building (60 Walton St.) at 11:45 or join us outside the HUD office at noon.
NEW YORK TIMES: http://dealbook.nytimes.com/2014/08/13/delinquent-mortgages-attracting-investors/?_php=true&_type=blogs&_php=true&_type=blogs&smprod=nytcore-ipad&smid=nytcore-ipad-share&_r=1&
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