Two recent actions will affect mortgage servicing via the Federal Housing Administration and the U.S. Department of Veterans Affairs.
Policies for CWCOT, REO properties reversed
According to a new mortgagee letter from FHA, policy reversals are slated for certain sales practices related to distressed single-family properties that served as collateral for loans the agency insures. A 30-day, exclusive advanced sale preference for “claims without conveyance of title” properties must end by May 30. Also, real estate-owned properties listed on the Department of Housing and Urban Development’s online Homestore must end a similar 30-day sales preference and revert to a 15-day period by that deadline.
“FHA’s evaluation of these policies has revealed the efforts were generally not successful in meeting their intended goals,” the administration said. “Instead, they have delayed sales of foreclosure properties, increased the deterioration of these properties, leading to lower sales prices and increased costs.”
The mortgagee letter cites data showing that 3% of 2,696 CWCOT sales in 2023 with an exclusive listing period went to owner-occupants, government entities or nonprofits. In 2024, the share was also 3% of sales. “During the new CWCOT exclusive listing period, very few properties have sold to owner-occupant buyers, and even fewer were purchased by HUD-approved nonprofits and government entities,” FHA said in its letter.
“For REO, it’s unclear whether the longer exclusive listing period resulted in higher overall sales resulted in higher overall REO sales to owner-occupants or shifted sales from the original listing period,” the administration said.
VA issues info shutting off VASP ‘waterfall’
Mortgage servicers will no longer have to follow the ordered “waterfall” of different options when attempting to get loans to reperform after a payment lapse once the Veterans Affairs Servicing Purchase Program — or VASP — ends, according information issued by the VA on April 23.
As of May 1, the agency is rescinding the VA Home Retention Waterfall that includes VASP as the final option and will stop accepting VASP submissions, including new VASP Trial Payment Plans. The VA will allow active TPPs to continue through Aug. 31 and will purchase successful loans, subject to VA’s determination that funds remain available for VASP.
VASP was introduced as an alternative in May last year as a rescue program to help veterans and their families after tens of thousands of veterans faced foreclosure due to the COVID-19 mortgage forbearance program ending.
