Share this article!

The U.S. Department of Housing and Urban Development (HUD) has proposed a new rule to govern the sale of seriously delinquent single-family mortgage loans insured by the Federal Housing Administration (FHA).

The proposed rule includes changes made during a demonstration program requiring all note sale purchasers to adhere to mission-oriented post-sale requirements, including offering a “first-look” to owner-occupants, nonprofit organizations, and government entities when properties associated with the purchased notes are sold. The proposed rule also would enable HUD to continue prioritizing awarding these mortgage loans to nonprofit organizations and governmental entities and provides guidelines for direct sales of notes to such buyers.

The program requirements included in the proposed rule are designed to ensure that the program meets its dual purpose to manage HUD’s fiduciary responsibility to the Mutual Mortgage Insurance Fund. According to HUD, the new rule is designed to expand the quantity of affordable homes for families.

“Today’s 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,” said Assistant Secretary for Housing and Federal Housing Commissioner Julia Gordon. “The new rules underscore the importance of loss mitigation and promote owner occupancy and neighborhood stabilization.”

HUD is requesting public comment on its proposal by Sept. 16.