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Reps Urge Improvements with Non-Performing Loan Sales Programs

March 9, 2016

03.03.2016The Federal Housing Finance Agency (FHFA) and the Department of Housing and Urban Development (HUD) have programs and guidelines in place, in which several members of the U.S. House of Representatives want to see improvements made. Under these agencies, their Non-Performing Loan (NPL) sales programs are in place to allow for delinquent home loans to be sold to bidding organizations and companies to take over the loans. The overall idea is for the winning bidders to then work with loan holders to come up with a solution to the delinquency status, preferably avoiding foreclosure. According to a letter sent to the FHFA and HUD by 45 House Representatives, these agencies are not doing enough.

There has been great concern over the last several months as more NPLs have been sold to private investors and equity firms instead of to non-profit, community based organizations, which focus on helping families remain in their homes. The letter is the 03.03.2016_02latest attempt by government reps to seek changes in the NPL programs. The big concern is that the private purchasers of these loans are not sufficiently taking into account the potential outcomes of these purchased loans. That they are not seeking helpful solutions to their delinquency status. If better guidelines and processes are not put in place, our communities and homeowners may see a worsening of neighborhood stabilization programs and affordable housing, which is already in crises across the country.

The letter, which can be read in full through a post at DS News (a leading source for Residential Real Estate issues and news), focused on four key changes that the reps feel need to be implemented to protect homeowners:

  • Entities who engage in unfair and abusive practices towards borrowers, while touting legitimate loan modification requirements as part of their “lip service”, should be disqualified from purchasing NPLs. These companies should not be allowed to profit from government programs designed to help homeowners in “financial and foreclosure crisis.”
  • The NPL programs need to be made more transparent in how they work, especially in regards to the criteria used to determine which properties are put into selling pools and why. Currently, there is no way to understand how or why properties are assigned to the various NPL pools for the loans to be sold. In particular, there is no known distinction between vacated and occupied properties.
  • Recognition needs to be put in place for those NPL purchasers who DO commit to foreclosure prevention efforts, and then follow through with what they offer. The organizations that seek to help families remain in their homes should not lose out on bidding NPL sales just because a better price for a loan is offered. The NPLs need to go to these reputable purchasers, as they are integral in “rehabilitating these properties and achieve favorable outcomes for neighborhoods.”
  • State and local governments should be included directly in the process of NPL sales. Currently, there is little to no direct involvement with local agencies that should be aware of upcoming sales in their regions. In particular, state and local housing finance agencies are vital to creating programs that can have a positive impact at the neighborhood level.

The letter highlights one success story of a non-profit winning a pool of NPL bids, New Jersey Community Capital. This organization represents one of many minority, or women owned, entities which are working to help families remain in their homes, offering a variety of programs and solutions created to help people avoid foreclosure. According to the letter, there needs to be more of these organizations working with NPLs, as the results they can garner are for the good of local neighborhoods, as opposed to profits.

While the FHFA and HUD did update their guidelines and policies on NPLs last year, it will be worth watching to see if they do more to help the people these programs were put in place to help. When you are ready to buy or sell a home, my team and I are ready to help you through the entire process. Our goal is to make your experience both easy and pleasurable. Contact us today at (925) 634-7820, or by email at


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