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HUD Expanding Distressed Loan Sale Program

December 19, 2012
FHA Acting Commissioner Carol Galante
FHA Acting Commissioner Carol Galante
The U.S. Department of Housing and Urban Development (HUD) is accelerating loan sales under its expanded Distressed Asset Stabilization Program (DASP).

The program enjoys strong nonprofit community support and has attracted major investors such as the Blackstone Group and residential loan servicing firms, such as Bayview Finance and Selene Finance.


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HUD’s next scheduled sale, which will take place late in the first quarter of 2013, will include 10,000-15,000 loans, and will have targeted Neighborhood Stabilization Outcome (NSO) pools in metropolitan areas in Georgia, California, Florida and Ohio.

HUD, through DASP, is selling severely delinquent mortgage loans insured by the Federal Housing Administration (FHA) through a competitive bidding process in which loan pools are sold to the highest bidder, including non-profit and community-based organizations. The program is part of a broad based effort to address the housing market’s “shadow inventory” and to target relief to communities experiencing high foreclosure activity.

HUD will sell at least 40,000 distressed loans over the next year, generally in quarterly sales, in an effort to reduce total claims cost and increase recovery on losses to FHA’s Mutual Mortgage Insurance (MMI) Fund.

“This program accomplishes two very important objectives- it supports communities hardest hit by the housing crisis and it saves considerable money for FHA’s insurance fund,” said FHA’s Acting Commissioner Carol Galante. “The results from the September sales were strong which tells us investors of all stripes and communities are eager for this solution.”

The results from the September sale were strong with a record participation among interested bidders.

The results, which are still preliminary, when considered by FHA’s independent actuary, yielded an estimate of an additional $1 billion in economic value to FHA’s Mutual Mortgage Insurance Fund in fiscal year 2013 alone by significantly reducing the expected severity of losses on loans sold through the program.

HUD’s September sale took place in two parts. The first part, conducted on Sept. 12th, consisted of 5,300 non-performing loans in six different “national” pools with a combined unpaid principal balance of $950 million. Winning bids went from 34.9 cents on the dollar of the unpaid principal balance to 44.5 cents.

Affiliates of Minneapolis-based Castle Peak Capital Advisors won the largest pool of 1,392 loans with an unpaid principal balance of $239.4 million with a bid of 39.54 cents on the dollar. The second part occurred on Sept. 27th and consisted of 4,100 loans in seven different “Neighborhood Stabilization Outcome (NSO)” pools with a total of $770 million in unpaid principal balance. Winning bidders paid on average 32 cents on the dollar

Blackstone affiliated Bayview Acquisitions LLC was among the winners in that group paying 26 cents on dollar of 1,430 loans with an unpaid principal balance of $269.1 million.

Like September’s sale, the first sale in 2013, which be held late in the first quarter, will be held in two parts. In the first part HUD will accept competitive bids for non-performing loans bundled into national pools. In the second part, to be held roughly two weeks after, loans will be offered in NSO pools in geographically concentrated areas including the following metropolitan areas: Atlanta; Southern California (Los Angeles, Riverside, San Bernardino and Long Beach); Ohio (Cleveland, Akron and Canton); and Florida (Fort Lauderdale, Miami and Greater Orlando).


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