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Federal program helps keep some delinquent borrowers in their homes

  • Article by: MATTHEW GOLDSTEIN
  • New York Times
  • September 2, 2014 - 8:42 PM

A four-year program by a federal housing agency to sell its most delinquent mortgages to private investors is producing modest returns when it comes to keeping those struggling borrowers in their homes.

To date, 2,049 mortgage sold to investors under the program have been reworked to allow the borrowers — many of whom had not made a mortgage payment in three years — to remain in their homes and start making payments again, according to a report released Friday by the Department of Housing and Urban Development.

But the overwhelming majority of the 73,000 troubled mortgages sold to investment firms, private equity shops and hedge funds have been either foreclosed upon, or the borrower was permitted to walk away from a home in exchange for forfeiting any rights to the property.

Roughly half of the loans sold to investors remain delinquent and have yet to be reworked, sold or foreclosed.

The report from HUD offers the first comprehensive look at the sale of nonperforming loans guaranteed by the Federal Housing Administration. HUD began the selling seriously delinquent mortgage to private investors at a discount in an attempt to reduce the federal government’s potential exposure. The government’s obligation to pay out on any claims arising from the loans ends once they are sold to private buyers.

 

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