Two U.S. congressmen have asked the Department of Housing and Urban Development (HUD) to address concerns that a program to sell mortgages to investors in bulk auctions is harming homeowners.
Sen. Sherrod Brown, D-Ohio, and Rep. Elijah Cummings, D-Md., requested a briefing on the program in a Feb. 1 letter to HUD secretary Julian Castro.
The letter cites the Center for Public Integrity’s investigation of the Distressed Asset Stabilization Program (DASP), a HUD program to sell mortgages insured by the Federal Housing Authority (FHA) to the highest bidder. The story outlined consumer protection shortcomings in the DASP system. The story was co-published on The Atlantic.
Brown is ranking member on the Senate Committee on Banking, Housing and Urban Affairs. Cummings is ranking member of the House Committee on Oversight and Government Reform.
“Several recent reports indicate that the Federal Housing Authority (FHA) may be selling nonperforming loans for properties located in some of our most vulnerable communities to hedge funds and private equity firms via quarterly auctions without sufficient protections for homeowners and neighborhoods,” the letter reads.
Over 98,000 mortgages have been sold through DASP with the stated goal of helping homeowners to avoid foreclosure while also getting troubled loans off the FHA’s books. The Center investigation revealed that the mortgages were sold for as little as 41 percent of their value and that only 16.9 percent of DASP mortgages avoided foreclosures.