The U.S. Department of Housing and Urban Development (HUD) on Wednesday proposed a new rule that would implement a permanent program to sell seriously delinquent single-family mortgages insured by the Federal Housing Administration (FHA).
These sales have been tested by HUD since 2002, but HUD said that the proposed rule will improve community stability and expand the availability of affordable homes for families as the market faces a supply challenge.
The proposed rule requires all note purchasers to adhere to mission-oriented post-sale requirements, including the establishment of exclusive first-look opportunities for prospective homeowners.
For example, when the property associated with the note is sold, a first look will be offered to owner occupants, nonprofit organizations and government entities. In addition, according to the proposed rule, HUD must also prioritize awarding these loans to nonprofits and governmental entities.
“This proposed rule will help struggling homeowners, stabilize neighborhoods, and make more affordable homes available for the people we serve,” HUD acting secretary Adrianne Todman said in a statement.
FHA Commissioner Julia Gordon added that the proposal “creates a permanent, standardized set of rules for note sales in the future that incorporates our learnings from previous sales that have taken place as part of the demonstration program.”
“The new rules underscore the importance of loss mitigation and promote owner occupancy and neighborhood stabilization,” Gordon said.
HUD is requesting public comments by Sept. 16, 2024.