HUD’s Distressed Asset Stabilization Program: Salvation or Sound Bite?


Earlier this summer, the U.S. Department of Housing and Urban Development (HUD) announced the kickoff of the Distressed Asset Stabilization Program (the Program or DASP) and last week HUD issued additional information regarding the upcoming September sale under the DASP. The Program expands an earlier Federal Housing Administration (FHA) single family loan sales pilot program (the Pilot) intended to safeguard the FHA insurance fund while helping seriously delinquent FHA borrowers avoid foreclosure after they have exhausted the loss mitigation options available under existing FHA regulations.

Under the Program, servicers may submit loans meeting certain criteria for claim submission and assignment to HUD before the loans are foreclosed, after which HUD will pool the loans and sell the pools to bidding investors. To participate in the Program, however, servicing mortgagees will have to certify the loans’ compliance with applicable FHA rules, including loan origination, servicing and loss mitigation requirements – certifications not required in HUD’s existing insurance claim process. In addition, investors that purchase recently announced Neighborhood Stabilization loan pools must be amenable to becoming long-term landlords in many instances.

HUD is moving forward with a September launch of the expanded Program, but questions remain as to how successful the Program will be, given the additional certifications required of the servicing mortgagees assigning loans to HUD and the additional restrictions on investors that purchase the Neighborhood Stabilization loan pools. The additional certifications made by assigning mortgagees could materially increase a servicer’s risk of liability under the False Claims Act, which authorizes the government to pursue treble damages, where the lender is liable for three times the damages sustained by HUD, and civil penalties of up to $11,000 per transaction, if such certifications are not accurate.

Please see full alert below for more information.

LOADING PDF: If there are any problems, click here to download the file.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© K&L Gates LLP | Attorney Advertising

Written by:


K&L Gates LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:

Sign up to create your digest using LinkedIn*

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.

Already signed up? Log in here

*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.