A Message from Terry Carr, Senior Advisor, Communications & Congressional Relations
As a key contributor to helping support the U.S. housing market, Ginnie Mae will participate in the upcoming Federal Housing Administration’s (FHA) Single-Family Loan Sale on September 12, 2012. This is the first FHA loan sale Ginnie Mae will participate in directly, contributing 250 loans from its own portfolio. As an active FHA business partner, Ginnie Mae enthusiastically supports sales like these with the goal of yielding better outcomes for troubled borrowers, neighborhoods and taxpayers alike.
This month’s loan sale will be the seventh sale since the program’s inception in September 2010. Ginnie Mae Issuers have participated in previous sales with high success rates. The sale allows Issuers to sell off their delinquent loans, recovering value more quickly by avoiding the long and costly foreclosure process. Ginnie Mae, as the guarantor of the Issuers’ mortgage-backed securities (MBS), also benefits from Issuers selling delinquent loans easily and efficiently. And most importantly, increasing liquidity among Issuers reduces the chance that they will default on their payments to MBS investors. That—in turn reduces the likelihood that Ginnie Mae will ever have to make those advances instead.
In addition, investors gain the opportunity to purchase pools of severely distressed loans below their face value. Typical investors range from specialized, servicing-focused firms, to medium- to large-sized capital investment firms. For borrowers, foreclosure is delayed a minimum of six additional months upon purchase of their mortgage. The servicer uses this time to work with borrowers to find the most affordable solution that will allow them to stay in their homes. Because the loans are generally sold for less than what the borrower currently owes, the purchaser has the ability to reduce or modify the loan terms while still making a return on the initial investment. Ultimately, the favorable economics of these transactions are expected to help minimize foreclosures across the country.
The September loan sale will also include the first offering from the Distressed Asset Stabilization Program. The Program features new neighborhood stabilization requirements intended to encourage investment in communities hit hardest by the financial crisis. Approximately 3,500 loans will be auctioned in the September sale from four particularly affected metropolitan areas including Chicago, IL, Newark, NJ, Phoenix, AZ, and Tampa, FL.
While foreclosure processing delays continue and many American neighborhoods persevere through the recovery process, Ginnie Mae’s involvement in the FHA loan sale program will help address the growing backlog of distressed mortgages and keep borrowers in their homes. Doing so helps us deliver on our mission, our guaranty and our commitment to Issuers, investors and, ultimately, the U.S. taxpayer.
Senior Advisor, Communications & Congressional Relations