Individuals to get a better chance of buying foreclosed homes
The Biden administration is set to give homeowners, families and nonprofits more opportunities to purchase homes that have been foreclosed before they are foreclosed on by large investors.
The changes to the guidelines for selling foreclosed homes with federally guaranteed mortgages are part of a plan to “create, preserve and sell” 100,000 affordable homes for owners and tenants over the three coming years.
In addition to reducing sales of foreclosed properties to investors, the Biden administration will expand federal programs that help fund construction of affordable housing and work with state and local governments to reverse exclusionary zoning policies that limit construction. new homes.
“These actions will expand access to essential capital for state housing finance agencies, enable local communities to build more affordable housing using historic investments contained in the US bailout, and advance policies to build more affordable housing. equitable housing such as inclusive zoning practices, ”Housing Secretary Marcia L. Fudge said in a statement.
Wednesday’s announcement prompts several federal agencies to work on affordable housing issues as Congress debates the Biden administration’s more ambitious “Build Back Better Agenda,” which aims to provide investments that would enable construction and rehabilitation. more than one million affordable housing units.
To do this, Congress should expand the Low Income Housing Tax Credit (LIHTC) and provide more funds for the HOME Investment Partnerships program, the Housing Trust Fund and the Capital Magnet Fund.
Mortgage Bankers Association President and CEO Bob Broeksmit welcomed the news.
“Lack of supply is a huge problem, and HUD and FHFA should do what they can administratively while Congress considers larger initiatives,” Broeksmit said. “MBA looks forward to continuing to work with administration, Congress and all other stakeholders on ways to address supply constraints and ensure government programs appropriately complement private capital to help both tenants and owners. “
In a recent report, the National Association of Realtors concluded that the rate of home production has slowed over the past two decades, missing about 5.5 million new units from 2001 to 2020. NAR estimates that builders will need to build over 2 million new homes per year over the next decade to close the gap.
In the meantime, the Biden administration is developing guidelines that will provide an exclusive registration period during which government entities, nonprofits, and homeowner buyers will be invited to submit bids for the ‘second’ sales. chance ‘of foreclosed properties insured by the FHA before they’ are offered to investors.
Second Chance No Transfer of Title (CWCOT) sales, which allow loan officers to sell foreclosed properties directly to third parties without passing them on to HUD, are now the most common way to sell FHA foreclosures.
“This method of selling cuts costs for taxpayers, but too often properties are sold to large investors, who either make them profitable or rent them out,” the White House said in a backgrounder detailing the proposed changes. . “Homeowners and nonprofits, which are more likely to need financing and are less aware of the CWCOT program, often do not have the option of purchasing these properties. “
Institutional investors posted their highest share of home purchases in six years in the second quarter of 2021, according to a recent analysis from Attom Data Solutions. Attom said institutional buyers made up the largest share of recent sales in Mississippi (11%), Arizona (10.4%), Georgia (8.8%), Nevada (7.6%) and North Carolina (6.7%). Last year, investors were more interested in markets with low prices and growing populations, according to a report from CoreLogic.
The Biden administration also wants to give homeowners a better chance of buying homes taken over by HUD, Fannie Mae and Freddie Mac.
Currently, potential homeowners and nonprofits have an exclusive “first look” at these properties, a 10 to 20 day period during which investors cannot bid on them. The FHA, Fannie and Freddie will extend those first look periods to 30 days, the White House said.
Home buyers can search for HUD-owned properties on HUD Homes. To search for homes in Fannie Mae’s REO inventory, visit HomePath.com. Freddie Mac entries are listed on HomeSteps.com.
Forbearance programs that allowed homeowners with government-guaranteed mortgages to suspend their monthly payments during the pandemic will expire in the coming months. As of mid-August, 3.25% of mortgage borrowers, or 1.6 million homeowners, remained on forbearance programs that allow them to take a break from their payments.
But all in all, HUD, Fannie, and Freddie have just over 12,000 single-family homes in their “real estate” (REO) inventory.
A moratorium prohibiting foreclosure proceedings against homeowners with federally guaranteed mortgages expired at the end of July. But before initiating foreclosures against borrowers who are 120 days behind on their payments, federal regulators expect lending departments to contact borrowers and give them an opportunity to seek help.
Black Knight data shows only 145,360 homes were at some point in the foreclosure process in June, compared to a peak of 2.3 million active foreclosures in December 2010, at the height of the most recent housing crisis.
Email Matt Carter