The Federal Housing Administration (FHA) has helped support access to affordable housing since becoming part of the U.S. Housing and Urban Development Department (HUD) in 1965. In 2010 the FHA and HUD took protecting market liquidity a step further and implemented the Single-Family Loan Sale (SFLS) Initiative, a program that allows the FHA to accept assignment of distressed, FHA-insured loans from servicers and sell the mortgages as nonperforming loans on behalf of HUD.
The rate of sales for these loans has increased dramatically since 2013, and the FHA encourages mortgage servicers with eligible loans to participate in the program each time it takes place. Our team has received news that HUD is considering a SFLS program for 2018, which would provide servicers with a new chance to free themselves from problematic loans. The program would also continue to reduce taxpayer risk via the support of FHA mortgages across the country and help both HUD and borrowers avoid foreclosure.
The program’s loan sales have generated FHA savings by reducing claim costs and maximizing financial recovery, all while giving struggling homeowners a chance to stay in their homes. The program also contributes heavily to maximizing recovery to the Mutual Mortgage Insurance Fund, which insures mortgages guaranteed by the FHA.
Loan Criteria for SFLS Eligibility
Servicers interested in participating in the SFLS program must identify unwanted loans to be considered for the SFLS Claims Identification process should the program be implemented in 2018. Any mortgage loan servicer can participate in the program as long as their loans meet HUD’s sale criteria.
While the criteria are always subject to change with each sale cycle, as a general reference, in 2014 the program criteria included:
- Unpaid principal balance cannot be under $20,000
- Must be at least six full payments past due and unpaid
- Must be at least three full payments past due if the property is officially deemed vacant or abandoned
HUD also outlines criteria for the properties as physical entities:
- Must be a single-family 1 to 4-unit dwelling
- Cannot be a condemned property
- Must not have Surchargeable Damage
Using an Investor Claims Partner to File SFLS Claims
Servicers interested in transferring nonperforming loans to HUD can bypass the headache and short-term fixed expense of filing these claims by partnering with an Investor Claims partner that can file SFLS claims on the servicer’s behalf. DIMONT is an Investor Claims partner with experience and success in filing HUD claims that can assist servicers in minimizing losses associated with SFLS claims.
Filing an SFLS claim begins with HUD issuing the Claim Identification Report with the dates SFLS claims can be submitted, thereby also providing an end date of submission of claims, which is within a very tight window. Servicers who partner with Investor Claims specialists like DIMONT will not only escape from the added responsibility of submitting SFLS claims on time, they will also find themselves with more time and resources to handle their remaining loans with precision and ease.