![]() Meanwhile, the FHA, due to an onslaught of claims, was desperately in need of a funding infusion. During the 2008 financial crisis and subsequent recession, many of those homeowners fell behind on their mortgage payments and foreclosures loomed. The agency, through the FHA, insures loans to lower-income and first-time homebuyers. HUD can’t reduce the principal owed on mortgages it holds for homeowners, but it can sell the mortgages in bulk to investors at a steep discount - at times as little as 41 percent of the mortgages’ collective value. ![]() In 2010, HUD launched the mortgage sales program - now known as the Distressed Asset Stabilization Program, or DASP - under intense pressure from Congress to improve its finances. Fannie Mae and Freddie Mac, who together with HUD directly or indirectly insure 70 percent of the country’s mortgages, began similar sales this summer. They claim that HUD, tasked with creating strong communities and affordable housing, is instead primarily facilitating a massive wealth transfer, with thousands of homes going from distressed borrowers to wealthy investors simply looking to profit. ![]() The idea is to shore up FHA’s hemorrhaging finances and give borrowers some breathing room to work things out with a new mortgage-holder so the loans will start “re-performing,” as HUD puts it.īut some housing advocates claim that only the first goal seems to have been met. HUD has sold thousands of mortgages this way. Uwansc maintains he has complied with the terms of his modification and has filed lawsuits against both Bank of America and Selene. “Whatever deal that went on between Bank of America, Selene and HUD is not known to me,” he says. Uwansc, who now faces foreclosure through the new servicer of the loan, Selene Finance, was unaware that any of this had transpired. The fund bought the pool of mortgages for about two-thirds of the $105.7 million HUD estimated the homes were worth. Under a special government program, in December 2013, HUD sold Uwansc’s mortgage along with 802 others to a fund created by Oaktree Capital, a hedge fund. But instead of dealing with shady subprime lenders, they are buying many of those same shaky loans from the government-at a significant discount. Seven years after the real estate market crashed and took the economy down with it, major investors are again buying mortgages by the thousands. If there’s no way to keep the homeowner in the home, HUD shepherds the property through the foreclosure process.īut not in this case. Normally at this point, instead of taking over the mortgage, HUD regulations would require the bank to work with the borrower during a pre-foreclosure stage. The mortgage was then transferred to the Department of Housing and Urban Development, which oversees the FHA. Bank of America filed for a claim and received payment. Uwansc’s mortgage was insured by the Federal Housing Administration, meaning if he failed to make payments, the bank would typically be paid the full value of what was left of the mortgage, plus costs associated with servicing the debt. When he didn’t pay the amount the bank said he owed, it claimed he was in default. He believed he had worked out a loan modification with Bank of America in 2011 after signing paperwork, but the bank disputed the terms Uwansc thought he had secured. “We loved it because it has this big yard where the kids can play,” Uwansc says.īut soon after closing on the loan, Uwansc began having trouble making payments. The Nigerian-born father of four moved into his house on Richardson Road in Gwynn Oak, Maryland, in 2005. Like millions of others, he found himself owing more on his house than it was worth. Julius Uwansc was in trouble with his mortgage after refinancing in 2009, just after the real estate bubble popped.
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