When the U.S. housing bubble burst in 2007 and 2008, millions of Americans lost their homes to foreclosure.  Since that time, the Obama administration has gone to great lengths to get the economy—specifically the housing market—back on track.  And we’re doing well: As The Hill reported last week, foreclosures in August 2014 “fell on a yearly basis to their lowest level since 2007.”

But working our way back to prosperity has not been without bumps, bruises, and challenges.  One effort managed by HUD—the Distressed Asset Sales Program (DASP)—is something my colleagues and I at the Federal Housing Administration have viewed as a significant step on the road to full recovery. 


For those who aren’t familiar, DASP allows pools of mortgages headed for foreclosure to be sold to qualified bidders while encouraging those bidders to help bring the loan out of default.  In many cases, it’s a less expensive alternative to foreclosure and sale as REO (“real estate owned”).

In fact, DASP is reducing total claims to FHA and it’s allowing us to avoid scenarios where we end up with thousands of empty American homes that decrease property values and harm communities.

DASP is providing an opportunity for many homeowners who are struggling to make their mortgage payments.  Our data indicates that 11 percent of homeowners who are part of DASP received loan modifications—and close to another 50 percent are still in default servicing.  This means that, without a doubt, the program is providing those families with an additional option that can help keep them in their homes and in their communities.  In other words, they’re getting another chance.  DASP is doing this all while enabling FHA to continue to advance its mission to create homeownership opportunities for those who are ready.

But that doesn’t mean we can’t improve the program.

In recent weeks, we’ve heard from a number of groups about DASP.  Many—if not most—are supportive.  But some have criticized, going so far as to call for the program’s suspension.  Of the information being shared about DASP, however, some of it doesn’t fully reflect the nature of the program.  And some of it is just plain wrong.  But in our effort to improve the DASP program, we’ve taken seriously some of the recommendations and we’re in the process of implementing several changes.

So I want to take a moment to explain exactly what those changes are and how we plan to strengthen DASP in the future.

First, we’re expanding our Direct Sale program.  To that end, we’re actively engaging with local governments that are interested in a direct sale of notes as an alternative to the notes sales or the REO process.

Second, we’re enhancing our loss mitigation quality control processes.  In addition to the required self-reporting done by Servicers of their mandatory loss mitigation process as part of the FHA program, we’ve introduced an in-house review of each loan to determine whether the Servicer of that loan has truly exhausted all loss mitigation options.

Third, we’re doing a better job at listening through more concerted stakeholder engagement.  At FHA, we’ve met with a variety of for-profit, non-profit, and governmental stakeholders who have expressed the desire for this type of program in the marketplace.  Those parties have also provided their concerns and recommendations to improve the program, many of which have been taken and applied in recent sales.  We’ll continue to engage with these stakeholders in an ongoing dialogue and, where appropriate, apply that feedback in future sales.

Fourth, we’ve heard non-profit groups loud and clear and we’re going to do a better job at non-profit outreach.  FHA has expanded its effort to contact non-profits who may want to participate in the DASP program.  We’re also exploring options for providing technical assistance and seminars on the note sale process to the non-profit community.

In addition to these program management changes, specifically, we’ve also modified how FHA will execute its November “neighborhood stabilization outcome,” or, NSO sale.  In this case, we’re expanding the number of available loan pools from six or seven to 13.  This means a larger portion of the loans slated for sale this fall will be part of the NSO sale, providing more opportunity to stabilize neighborhoods.  We’re also creating what we call “micro-pools”—small and mid-sized, geographically concentrated pools aimed at attracting a more diverse range of buyers. 

Finally, we’re also making a significant change with respect to the advance notice given of the NSO sale date.  Historically we’ve announced sales four weeks prior to the sale date.  But we’ve received a good deal of feedback in recent months from non-profit organizations who’ve said that more time for due diligence leading up to a sale would be helpful in assessing their participation. Therefore, we announced our November sale in early September, allowing a total of nine weeks for due diligence.

In sum, we believe these changes will improve the program.  But we’re not letting up. We have a responsibility to get this right—and through listening to our many stakeholders, we’ll continue to seek ways to improve DASP.  And that’ll bring us one step closer to the full housing recovery we all want to see.

Gebre is general deputy assistant secretary for Housing at the Department of Housing and Urban Development (HUD).