An opposite day version of Christmas comes early to the U.S. Department of Housing and Urban Development, as community groups in several cities including Los Angeles, San Francisco, and Boston will present local HUD officials with their “Grinch of the Year” award for refusing to fix a controversial program that auctions off the ownership of homes of troubled borrowers, which the advocates say is driving foreclosures.
The community groups are calling for changes to the Distressed Asset Stabilization Program, created in 2012 by the Federal Housing Administration.
“By auctioning pools of delinquent loans to the highest bidders — vulture capitalists — HUD is driving unnecessary foreclosures and contributing to the rise of ‘Wall Street Landlords,'" said Gisele Mata, an organizer with the Alliance of Californians for Community Empowerment.
“We have asked HUD and FHA officials to change the Distressed Assets program to prioritize keeping families in their homes and preserving affordable housing, but so far they would rather play the Grinch and let Wall Street steal families’ futures.”
Community groups began their campaign to change the DASP program in September with public release of the report “Vulture Capital Hits Home: How HUD is Helping Wall Street and Hurting Our Communities” by the Center for Popular Democracy and the Right to the City Alliance.
“Rather than just sell loans — which really means a family’s future — to the highest bidder, the FHA should take into account whether the buyer has a track record of helping families stay in their homes,” said Rachel LaForest, the executive director of the Right to the City Alliance. “There are non-profits and potentially others that are successful in working with families to maintain homeownership and, where that’s not possible, to create affordable housing options. They should get priority.”
Community groups and advocates say this is what is wrong with DASP:
- The current structure of DASP auctions hampers community stabilization by considering only the highest bid without weighting the bidders’ track record of good outcomes for homeowners and communities.
- The current outcome requirements and reporting structure fails to hold purchases accountable to neighborhood-stabilization goals and provides insufficient transparency and prevents community oversight.
- The current pre-sale certification phase does not ensure that the FHA mortgage modification process has been followed before loans are included in DASP auction pools.