Today the U.S. Department of Housing and Urban Development (HUD) announced changes to the Federal Housing Administration's Distressed Asset Stabilization Program that will help borrowers stay in their homes and support neighborhood recovery.
Under the program, HUD will require third party buyers of FHA's non-performing loans to include principal reduction as part of their loan modification programs. This change builds on the Federal Housing Finance Agency's recent efforts in this area. Furthermore, HUD will create more favorable pricing for nonprofit organizations in the loan auctions. Additional and related data will also be provided.
In a joint statement, standard-bearers with The Leadership Conference for Civil and Human Rights, the NAACP and the Center for Responsible Lending, offered the following comments:
Hilary O. Shelton, NAACP Washington Bureau Director and Senior Vice President for Advocacy:
African-American homeownership is now less than 42 percent, while the national average is nearly 64 percent. The economic recovery will not be complete until those who have been left out are brought in. In some places, concentrated and continuing foreclosures still destabilize entire neighborhoods. By affording troubled borrowers the opportunity to remain in their homes, these changes by HUD will helpfamilies and communities.
Wade Henderson, President and CEO of The Leadership Conference on Civil and Human Rights:
HUD has taken a significant step forward for the housing market with these announced changes, and we look forward to seeing them implemented. Allowing principal reduction for struggling homeowners and making it easier for nonprofits access to nonperforming loan auctions will go a long way in helping us to undo the damage caused during the housing crisis. We're going to continue urging HUD and other agencies to build on these efforts so that more communities – particularly those that have yet to benefit from the economic recovery – can be helped. More than half of the $2 trillion lost in property values during the foreclosure crisis was borne by consumers of color. That burden has been carried much too long, and it needs to be lifted. We're glad to see today's announcement, and look forward to more.
Mike Calhoun, President of the Center for Responsible Lending:
Although the housing market continues to improve overall, many homeowners still struggle with their mortgage and owe more on their mortgage than their home is worth. Communities of color, low-wealth borrowers, and families and communities with modest means acutely feel these challenges. The three-pronged approach of improving the handling of nonperforming FHA loans, working with nonprofits to stabilize neighborhoods, and granting principal reduction, will help both struggling borrowers and neighborhoods. Housing policies should focus on helping to keep families in their homes and reduce the community costs of foreclosures.
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