FHA Introduces New Distressed Sale Asset Program

On Monday, the Federal Housing Administration is announcing the expansion of the Distressed Asset Sale Program (DASP).

This program is not quite the same bulk sale program being offered by the Federal Housing Finance Agency (FHFA) and the government sponsored enterprises, Fannie Mae and Freddie Mac.

The DASP is a “paper sale” where FHA sells the loans, in bulk, to investors in a competitive bid process. The loans can only be sold after the borrower has gone through the entire FHA loss mitigation process.

Prior to the formal foreclosure proceeding the loans are sold to investors. The Foreclosure is delayed for at least six months while the investor attempts a work out with the borrower (short sale, loan modification, etc.). As many as half of the loans sold are retained by the investor -- if there is not a work out to avoid flooding local markets.

FHA initially hoped to sell 5,000 loans quarterly but decided to increase it's goal to 9,000 loans.