The U.S. Department of Housing and Urban Development for the first time failed to sell some of the soured mortgages it’s auctioning off in the wake of the housing crisis, according to four people with knowledge of the results.
HUD deemed bids on about $450 million of home loans too low to accept at an Oct. 30 sale, said the people, who asked not to be named because the details are private. Since 2010, the agency has sold about 50,000 non-performing single-family loans insured by the Federal Housing Administration to investors willing to either help keep the borrowers in their homes or rehab the properties for sale.
The sales are an attempt by HUD to simultaneously stem losses at the financially troubled FHA and pursue its public mission of averting foreclosures on the underlying properties. The refusal to accept bids on some of the pools may reflect that the FHA reached its limit on the losses it was willing to realize to keep some borrowers in homes or stabilize markets.
“If you can get someone who’s willing to take these notes and fix the mortgages, or the properties and rent them out or transfer them to a nonprofit, the idea is that you’re not hurting places that have been hit hard by foreclosures,” said Andrew Jakabovics, senior director of policy development at Enterprise Community Partners and a former HUD policy adviser who helped design the note sale program. “It’s about striking that balance but also making sure that they’re not giving properties away far below what the value is.”