FHA Announces New Changes to Troubled-Loan Program
Last week, under direction from the Obama administration, the Federal Housing Administration (FHA) will now force investors to prioritize reducing the principal amount borrowers owe on their mortgages in order to be eligible to sell loans through the Distressed Asset Stabilization Program (DASP).
Originally created in 2012, the FHA started DASP with the intention to prevent homeowners with “underwater” mortgages from losing their homes to foreclosure. While the changes to the DASP may help a few borrowers right now, changes to the program only expand federal influence within the housing industry.
The Federal Housing Finance Agency (FHFA), charged with regulating Fannie Mae and Freddie Mac, engage in a similar program in which non-performing loans (NPLs) are sold to investors to help prevent distressed homeowners from foreclosure. That program has been largely unsuccessful as three-quarters of the NPL are still delinquent today.
Programs like the DASP or the NPL actually disrupt housing stability and wise mortgage sales and investments. Congress should work to abolish these government programs not expand them. Allowing lenders, investors, real estate agents, and consumers to do business with each other outside of federal intervention will provide the long-term housing market stability and growth the federal government has been unable to legislate.