The Federal Housing Administration is conducting regular quarterly sales of problem loans where the servicers have exhausted all loss mitigation options and the borrowers are one step away from foreclosure.
The nonperformers go on the action block stripped of FHA insurance and with a requirement that the buyers cannot foreclose for six months.
In a June sale, FHA auctioned off 840 loans with an unpaid principal balance of $148 million. The broker price opinion on the single-family properties was $96.2 million.
Kondaur Capital Corp., Irvine, Calif., bid $53.2 million for the 840 loans and won the pool at 37% of UPB.
FHA officials refer to these auctions as "601 note sales." Bids on the September 601 note sale are due today, September 14.
Agency officials view the note sale program as a way to encourage servicers to use every possible loss mitigation tool to keep borrowers in their homes. When that fails, the servicer can submit a claim on the defaulted mortgage to FHA while the borrower is still in the home.
“This option aligns the interests of the servicer and FHA to review the mortgage and identify strategies for the borrowers to keep their homes," FHA acting commissioner Carol Galante told a congressional panel recently.
"We feel that this program will be a welcomed addition to the Administration's foreclosure avoidance tool kit," she added.
