In an effort to erase one legacy of the 2008 housing crisis and prevent thousands of potential foreclosures, the Federal Housing Administration (FHA) on Friday announced that it would begin to sell off distressed mortgages in bulk, the New York Times reports.
The FHA is currently responsible for over 700,000 severely delinquent mortgages — most of which were accumulated between 2007 and 2009. Under this proposal, the agency would aim to sell 5,000 mortgages a quarter.
Selling the delinquent loans will undoubtedly be difficult. Already, the FHA receives 36 cents on the dollar for a foreclosed house and in a pilot version of this program it has sold 2,000 distressed loans.
While no official figures have been announced, according to the Times, the FHA has outlined the program’s qualifications:
To be eligible for the program, loans must be more than six months delinquent and must have been through the administration’s available foreclosure-prevention programs. The loan servicer must have begun the foreclosure process, and the borrower must not be in bankruptcy. Investors would have to halt foreclosure proceedings for at least six months and would have to agree not to sell half the properties for at least three years.
While the foreclosure crisis has been felt nationwide, it’s had a particularly harsh effect on states in the Sun Belt. Last year, 17 of the nation’s top 25 metro areas with the highest foreclosure rates were in Florida. Meanwhile, as explained in a previous Forefront story, federal regulators have taken over more than 70 banks in Georgia since the housing crisis began.
This disproportionately high rate of foreclosures has stifled investment and economic development in the region, and is one reason why decades of unprecedented growth have come to an end.