WASHINGTON (4/28/15)--Loan servicers will be required to delay mortgage foreclosures and evaluate borrowers for their eligibility for loss-mitigation programs, based on changes to the U.S. Department of Housing and Urban Development's (HUD) Distressed Asset Stabilization Program (DASP).
HUD also announced changes to its Neighborhood Stabilization Outcome (NSO) sales portion of DASP--changes designed to increase nonprofit participation.
Since 2010, the FHFA's DASP has allowed for pools of mortgages headed to foreclosure to be sold to qualified bidders. The program is meant to encourage bidders to work with borrowers to help bring the loan out of default.
DASP sales are generally broken into a "national sale," featuring loans from a diversified cross-section of the country, and NSOs, which have loans drawn from specifically targeted geographic areas.
Previously, loan servicers could foreclose six months after they received the loan. They were encouraged, but not required, to assess a borrower's qualifications for loss mitigation programs.
Under the new requirements, loans servicers must delay foreclosure for a year and evaluate all borrowers for the Home Affordable Modification Program, or a similar loss mitigation programs. NSO updates include giving nonprofits a first look at vacant properties, allowing purchasers to re-sell notes to nonprofits and offering a nonprofit-only pool.
Loans can be placed in the pool as long as the borrower is at least six months delinquent on their mortgage and the servicer has exhausted all steps in the Federal Housing Administration loss mitigation process.
According to HUD, it plans to hold its first DASP sale in June.