The Federal Housing Administration’s continuing efforts to improve recoveries on foreclosed properties are showing some results, according to FHA commissioner Carol Galante.
The commissioner told a Senate panel last week that loss severity of short sales and
FHA plans to launch a “proactive campaign” soon to get servicers to promote the use of short sales (which FHA calls “preforeclosure sales). FHA recently streamlined the PFS process with the issuance of Mortgagee Letter 2013-23.
The letter says servicers may approve a short sale or deed-in-lieu transaction “without verifying hardship or obtaining a complete mortgagor workout package” if certain conditions exist.
FHA has also developed a “Claim Without Conveyance of Title” program to encourage servicers to sell REO without conveying the foreclosure properties to FHA asset managers. This CWCOT program is designed to reduce FHA’s carrying costs of managing and marketing the REO properties.
“FHA completed a CWCOT pilot program to encourage third-party sales at foreclosure auctions,” according to a FHA quarterly report to Congress. Currently, 12 mortgage servicers that service 90% of all FHA-insured loans are participating in the CWCOT program.
“This method of disposing of these properties is expected to yield lower losses” to the FHA insurance fund “than selling them through FHA’s normal REO disposition process,” Galante told the Senate Banking Committee at a July 24 hearing.
