83% of Mortgages Sold by Government to Banks and Hedge Funds End in Foreclosure

Tuesday, September 29, 2015
(AP photo)

A government program launched following last decade’s mortgage crisis to help struggling homeowners has mostly helped banks and hedge funds, and not Americans in danger of losing their houses.


Five years ago, the Department of Housing and Urban Development (HUD) launched a mortgage sales program called the Distressed Asset Stabilization Program (DASP) so it could unload teetering mortgages to the private sector.


DASP was supposed to not only help HUD improve its finances, but also assist homeowners facing the risk of foreclosure work out new terms with the banks or hedge funds buying the mortgages. But things haven’t worked out that way for the vast majority of homebuyers.


DASP has resulted in more than 98,000 mortgages—representing more than $16.7 billion in total debt—being sold to investors “at times as little as 41 percent of the mortgages’ collective value,” the Center for Public Integrity reported. The struggling Federal Housing Administration, which insures mortgages, became solvent as a result of the sales. However, only 16.9% of the mortgages sold between 2010 and 2014 avoided foreclosure.


HUD claims that a decline in foreclosures shows that the housing market is stabilizing. Seeing may be believing, but what is seen may not be accurate. It may be that DASP is being used by HUD to invent “ghost inventories” where foreclosures haven’t appeared on the books yet, but may still occur, according to Daren Blomquist, vice president of RealtyTrac. “This process of selling loans, aside from whether it’s working, it has the added bonus of making the foreclosure numbers look better in the short term,” he told the Center for Public Integrity.


The Center’s Jared Bennett reported that “rather than offering better terms to borrowers, the new owners often flip the homes for a profit,” which “can leave struggling homeowners…in the dark, and in some cases on the streets.” Housing advocates have criticized HUD for “primarily facilitating a massive wealth transfer, with thousands of homes going from distressed borrowers to wealthy investors simply looking to profit,” wrote Bennett.

-Noel Brinkerhoff, Danny Biederman


To Learn More:

Hedge Funds Get Cheap Homes, Homeowners Get the Boot (by Jared Bennett, Center for Public Integrity)

Government Housing Program Backfires, Helps Wall Street Instead (by Steve Straehley, AllGov)


Elaine Williams 8 years ago
@crittermon - exactly! Were we actually expecting investors to have a heart? Are the people in charge really that dumb? Ad they listened to noted economist Joseph Stiglitz and Professor of Economics William K. Black when all this crap started in 2007 - we would all be better off. Here we are in 2015 - investors are wealthier than ever and millions are displaced and squeezing in with relatives - working 2 low paying jobs and trying desperately to keep their youngsters in school and in line. We the people have been treated like shit.
crittermom 8 years ago
First we had HAMP (Hellbent At Making Profits), where the banks were given all that money to do modifications, but the end result was that 84% were denied & lost our homes. Now we have DASP (Determined At Securing Profits?), where the figures are almost identical. 83% end in foreclosure & lose their homes. Perhaps we can have a 4th grader explain to the govt that these programs aren't working FOR the homeowners? Duh? I remain disgusted with the way the govt has aided & abetted the banks in taking our homes. Hmpff!
Charles Reed 8 years ago
This program the HUD has is BS as they are not a lender and they cannot sale or buy loans. This loans should have at the very least been rewritten because they were a part of the Ginnie Mae MBS! The Note that are endorsed in blank are forever separated from the debt forever!

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