News of HUD selling off masses of FHA loans to investors may not make California real estate agents happy, but the real question is what it means for homeowners and buyers?
As a part of the Federal Housing Administration’s attempt to restore solvency after reporting a huge budgeting short fall it has announced plans to shed 40,000 seriously delinquent loans to real estate investors. In fact the U.S. Department of Housing and Urban Development has already reported the first round of 9,400 mortgage sales.
The FHA is currently sitting on some 700,000 distressed mortgages and foreclosure properties. Yet, while only a small portion of these may be in California local Realtors are keeping a watchful eye on any bulk REO and mortgage sales which could negatively affect their businesses.
HUD has proclaimed that this move under the DASP program could potentially help thousands of borrowers if the buyers of these mortgage notes modify their loans and let them stay. However, these loans currently be sold off are already seriously behind and servicers have reportedly already exhausted all of the options at their disposal to remedy the situation.
This makes it somewhat unlikely that the new mortgage holders will modify a huge percentage of these loans successfully. With home prices rising some may simply find it more appealing to seize as many of the homes as they can and resell them for big profits.
Some homeowners will probably at least receive temporarily receive some mortgage relief whether that is being offered the option to turn over their deeds and rent their homes back or being given another 9 months before being foreclosed on and evicted.
Still many of these properties will become short sales or foreclosures over the next 3 years. This is a slow enough pace not to dampen the market but the California Association of Realtors (CAR) has already been voicing its displeasure over bulk sales and how much inventory it is taking out of the market.
Tight housing inventory means less homes for real estate agents to sell. On the bright side it also means homes selling fast and rocketing home values.
