From the latimes.com – thanks daytrip:
The protests over the FHA Distressed Asset Stabilization Program are the latest ripple in the wake of the foreclosure crisis, which has seen growing concern about the “Wall Street-ization” of the housing market.
A handful of large real estate trusts and investment firms have scooped up an estimated 200,000 bargain-rate houses in the last two years — in some cases elbowing first-time home buyers out of the way — and turned them into rental properties.
Some of these firms are now buying the loans, getting potential rental properties even before they are in foreclosure. Other buyers aim to profit by collecting mortgage payments or by selling the homes after they foreclose.
From the FHA’s perspective, the program is working, said Carol Galante, the agency’s commissioner.
“We really do consider the DASP to be quite successful in accomplishing what it set out to do,” she said. “That was to achieve significant cost savings for [the FHA] and at the same time offer borrowers a final opportunity to avoid foreclosure.”
Many of the loans that are being sold haven’t had payments on them in two or three years, Galante notes, and they’ve run out of options for being reworked by the FHA. But a new owner may be able to restructure them or reduce principle payments to help borrowers, she said.
Of the 38,000 loans that had been sold before July 2013, about half are still being worked out, according to data released last week by HUD. In about 5% of cases, borrowers are back on schedule making payments. Most of the rest ended either in a foreclosure or short sale or were flipped to another investor and are no longer being tracked.
The program has some successes, said Sarah Edelman, a policy analyst at the Center for American Progress.
About one-fifth of the loans are in “neighborhood stabilization” loan pools, which are geographically concentrated and carry higher workout requirements. Nearly 24% of them are being paid on time. And among the relatively small slice that were sold to nonprofit lenders that partner with community housing groups, the success rate tops 35%.
“This program shows a lot of potential,” Edelman said. “FHA really has an opportunity to build on its strengths.”