HUD to sell 1,558 reverse mortgage notes secured by vacant properties

The notes combined have a loan balance of roughly $394 million, which includes a property listed on the National Register of Historic Places

The U.S. Department of Housing and Urban Development (HUD) announced recently that it is moving to sell a package of 1,558 reverse mortgage notes secured by vacant properties. The notes have a loan balance of approximately $394 million, according to the sale’s entry in the Federal Register, later amended.

The sale will take place on Dec. 5, 2023.

“The sale will consist of due and payable HUD-Held loans,” according to details provided by Falcon Capital Advisors, the firm managing the sale. “The loans are first liens secured by Home Equity Conversion Mortgages (HECMs) securing 1- to 4-unit, vacant residential properties where all borrowers and any non-borrowing spouses are deceased.”

The package designation is HUD-Held Vacant Loan Sale 2024-1 (HVLS 2024-1). Up to 50% of the loans on offer “may be awarded on a priority basis to nonprofit organizations and governmental entities with a documented housing mission,” Falcon Capital said.

The package includes a property found on the National Register of Historic Places. The “Mark House,” located in Albany County, New York, and first built in 1791, originally sat on nearly 700 acres made up of smaller tenant farms leased out to other tenants until that system was abolished by the mid-19th century, according to a story at Spotlight News about the property.

Renovations on the home occurred in 1840, and the property remained in possession of the original family until 1881.

“This single asset pool loan sale will have a separate CAA with representations and a breach provision specifying that the Purchaser may not present a derivative breach associated with the listing on the National Register of Historic Places,” Falcon Capital said of the property’s inclusion.

The Biden administration has noted in the past that these vacant note sales can add to the U.S. housing supply by giving mission-oriented housing organizations a first-look period at such properties.

“Consistent with the Biden-Harris Administration’s September 1, 2021, announcement that more HUD-owned properties should be returned to future owner-occupancy, participation in this sale will be limited to eligible, mission-driven non-profit organizations and units of state and local government – the first competitive bid sale exclusively for these entities,” HUD explained ahead of a previous note sale in early 2022.

A senior HUD official later discussed how HECM properties specifically can play a role in such efforts.

“It’s not really a supply-oriented program, in that people who get a HECM mortgage, by definition, are already [residing] in their property,” a senior HUD official explained to RMD in 2022.

“It is important that if there are situations where a HECM property ultimately goes to claim — whether it’s because the borrower is deceased, or something else happens — it is very important for us to provide that first look on those properties, so that those properties can remain in homeownership with a new owner,” the official said.

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