The Federal Housing Administration (FHA) will be making several enhancements to the Distressed Asset Stabilization Program (DASP) in order to help struggling homeowners with principal reductions and protection from “payment shock” on their FHA loans to avoid foreclosure, according to the U.S. Department of Housing and Urban Development (HUD).

FHA’s latest enhancements will forbid investors from abandoning low-value properties in neighborhoods with high foreclosure rates to prevent blight. FHA loans will also not be eligible to be sold through the program until mortgage servicers have explored every possible option under loss mitigation.┬áPart of the new plan will allow non-profit organizations, local governments and other governmental entities to participate in DASP.

Some of the FHA enhancements that have been made to the DASP include:

Principal Reduction/Capital Arrearage Forgiveness – Principal forgiveness is the first option investors must consider offering to borrowers when evaluating them for a modification.

Payment Shock Protection – FHA will limit interest rate increases to no more than one percent per year after a five-year period where the rate is fixed; this is consistent with the Home Affordable Modification Program (HAMP).

Walk-Away Prohibition – Effective immediately, FHA will prohibit any purchaser of single-family mortgages under DASP from abandoning lower value properties in order to prevent neighborhood blight.

HUD’s Principal Deputy Assistant Secretary for the Office of Housing, Ed Golding had said;

“FHA is deeply committed to protecting struggling homeowners and making certain they have the greatest opportunities to avoid foreclosure and remain in their homes. While thousands of homeowners avoided foreclosure through this note sales program, we continue to explore new ways to help these families and to offer more opportunities for public-minded organizations to have a seat at the table.”

Target loans for DASP sales based on the interest of non-profits and local governments-FHA will enhance its efforts to identify and offer loans in targeted distressed areas to non-profits and local governments. FHA will continue its outreach to solicit their interest in geographically targeted loan sales. These efforts are aimed at helping vulnerable neighborhoods maintain more stable communities.


Erik Sandstrom
LoanSafe's Mortgage Expert
I'm a Senior Loan Officer and LoanSafe mortgage expert. If you need a live rate quote, or need help getting a new mortgage, please call me direct anytime at 619-379-8999.