FHA to Remain Uninvolved with REO-to-Rental

By Stevie Duffin Updated on 12/14/2012

By Daniel Duffield

Carol Galante, acting commissioner of the Federal Housing Administration (FHA), stated to a gathering of mortgage professionals that her organization will not create an REO-to-rental program comparable to the Fannie Mae equivalent.

The Federal Housing Finance Agency (FHFA) has recently finalized numerous sales of REO and has been announcing winning bidders.

According to the statements issued by Galante, the REO-to-rental strategy is not viable, despite the fact that a rental strategy is critically significant. Galante stated that it was not the optimal decision for the FHA, servicers, borrowers, and the communities which they inhabit.

Galante additionally said that the FHA portfolio contains approximately 700,000 delinquent mortgages.  She proposes to work through these outstanding loans in order to sell the notes, stating that DebtX will likely simplify these resettlements.

For national mortgage investors, the borrowers cannot be put through a foreclosure in less than six months.

As to a time frame, Galante neglected to mention when these intended sales would occur. In the past, the FHA has sold mortgage portfolios. According to Galante, the goal is to sell off roughly 10,000 delinquent mortgages each quarter.

However, other conditions apply, said Galante. For instance, a maximum of 50% of the properties are permitted to be sold on the market as vacant foreclosures. Instead, the buyer would need to enact another solution, and under these circumstances, allowing the homeowner as a renter would be satisfactory.

According to Galante, this strategy is the most groundbreaking one utilized within the past year, adding that the FHA will announce additional information regarding the policy in the near future.

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