Homeownership: Mixed Results and High Costs Raise Concerns About HUD's Mortgage Assignment Program
RCED-96-2
Published: Oct 18, 1995. Publicly Released: Oct 31, 1995.
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Highlights
Pursuant to a congressional request, GAO reviewed whether the Housing and Urban Development's (HUD) mortgage assignment program: (1) helps borrowers avoid foreclosure; (2) reduces the Federal Housing Administration's (FHA) foreclosure losses; and (3) can be improved to reduce such losses.
Recommendations
Matter for Congressional Consideration
| Matter | Status | Comments |
|---|---|---|
| Congress may wish to consider eliminating the mortgage assignment program if it believes that the additional losses incurred by the assignment program are excessive in relation to the number of borrowers that avoid foreclosure. | As a direct result of the recommendation, the Balanced Budget and Downpayment Act (P.L. 104-99) was enacted on January 26, 1996. It eliminated HUD's Mortgage Assignment Program and provided the Secretary of HUD authority to assist borrowers in default by other means, such as loan modification and deed in lieu of foreclosure. | |
| Congress may wish to consider establishing a short-term, temporary relief program to replace the mortgage assignment program for those borrowers who default on their FHA mortgages. | As a direct result of the recommendation, the Balanced Budget and Downpayment Act (P.L. 104-99) was enacted on January 26, 1996. It eliminated HUD's Mortgage Assignment Program and provided the Secretary of HUD authority to assist borrowers in default by other means such as loan modification and deed in lieu of foreclosure. | |
| If Congress believes that the borrowers served by the FHA single-family program are at high risk and therefore in need of additional assistance in the form of forebearance, it should consider program changes that would reduce but not eliminate additional future losses such as: (1) requiring borrowers to resume full mortgage payments within a shorter time period than the 36 months currently allowed or eliminating outstanding delinquency amounts within a specified period; and (2) requiring that only borrowers who can pay half their original amount or more be assigned to the program. | In line with recommendation number 1 above, legislation was enacted to eliminate the program and replace it with an alternative program. This recommendation, aimed at reforming the eliminated program is now moot. |
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Financial analysisFinancial managementForeclosuresHomeowners insuranceLoan defaultsLossesMortgage loansMortgage programsMortgage protection insuranceMortgage payments