WASHINGTON–The Federal Housing Administration (FHA) has announced plans it says will make it easier for people to sell distressed mortgages to investors and make it easier for borrowers to stay in their homes.
However, some analysts are suggesting the changes will also be more costly to taxpayers.
The changes announced by the FHA would require investors to prioritize reducing the amount borrowers owe on their mortgages before moving to other options, such as reducing interest rates and eventually foreclosing on the property. The measures make it easier for borrowers who owe more than their homes are worth to be able to pay off their mortgages, according to the FHA.
But some analysts have said the changes could reduce the amount of money investors are willing to pay the FHA for the mortgages and the money it gives back to the U.S. Treasury. The FHA said it doesn’t anticipate the additional restrictions will negatively affect prices for the loans.
When it launched its Distressed Asset Stabilization Program in 2012, the FHA was facing enormous losses on loans that it had guaranteed and that were going through foreclosure. There were also complicated rules critics said made it difficult for the agency to write down loan balances for troubled borrowers.
The FHA said it has since sold about 100,000 loans to investors, and that approximately 20,000 loans a year qualify for the program.