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Risk & Opportunity: the Distressed Asset Stabilization Program (DASP)

April 07, 2015
As part of my Economic Policy Internship with the Center for American Progress, I built a database, researched and co-wrote a report on the Federal Housing Authority’s Distressed Asset Stabilization Program (DASP). FHA launched DASP in 2012 as an initiative to sell distressed single-family loans in bulk, after the FHA loss mitigation protocols have failed to save the home and the only remaining option is foreclosure. The bulk sales crucially help limit the losses FHA would incur if these distressed loans went through the full foreclosure process.

By Aashna Desai, SAS & Wharton ’16

Under the DASP program, FHA pays claims on selected delinquent loans before those loans go through foreclosure and then sells those loans, which are stripped of their FHA insurance guarantee, to private investors who buy them at discounted rates. The entity that buys the loan through DASP either services the loan or hires a new mortgage servicer to service the loan. After the investor buys the loan, it must fulfill any requirements that FHA has specified. FHA claims that the program also helps underwater borrowers, because the new buyers of the loans might have more options to help homeowners, including providing principal reduction, which FHA cannot do under its statutory limitations. Nearly 100,000 loans have been sold through DASP since 2012, and the program continues to operate.

Currently, FHA sells loans through two types of auctions: national offerings and neighborhood stabilization outcome auctions. The loans sold through the national offerings are from all over the country, while the loans sold through the neighborhood stabilization outcome auctions tend to be concentrated in metropolitan areas that were hard-hit during the foreclosure crisis, such as Atlanta, Prince George’s County in Maryland, or Chicago. Bidders for loans sold through national offerings pledge to wait at least six months before foreclosing on a borrower in the hope that the new owner can provide loss mitigation opportunities that FHA could not. After six months, a buyer of a loan through a national offering can resolve it in any way they choose. On the other hand, buyers of neighborhood stabilization loans must handle at least half of the loans they buy in a way that stabilizes the surrounding neighborhood. Common purchasers of both national and NSO bulk sales are single-family rental companies, private equity firms, and investment companies seeking to buy cheap mortgages. A few buyers of NSO pools are community-based nonprofits, which are trying to keep homeowners in their homes to stabilize hard hit communities.           

While DASP may be beneficial to homeowners, FHA has not published any data on the results of the auctioned off loans. To ensure that DASP is actually improving prospects for homeowners, FHA should be more transparent about where these loans end up and what happens to them. Moreover, given the high private sector demand for non-performing loans, HUD may be well positioned to improve the FHA insurance fund through the DASP program and to ask more of DASP buyers so that the program can offer greater opportunity to homeowners and neighborhoods. 

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RESOURCE SPOTLIGHT:

  • <h3>National Center for Education Statistics</h3><p><strong><img width="400" height="80" alt="" src="/live/image/gid/4/width/400/height/80/479_nces.rev.1407787656.jpg" class="lw_image lw_image479 lw_align_right" data-max-w="400" data-max-h="80"/>The National Center for Education Statistics (NCES) is the primary federal entity for collecting and analyzing data related to education in the U.S. and other nations.</strong> NCES is located within the U.S. Department of Education and the Institute of Education Sciences. NCES has an extensive Statistical Standards Program that consults and advises on methodological and statistical aspects involved in the design, collection, and analysis of data collections in the Center. To learn more about the NCES, <a href="http://nces.ed.gov/about/" target="_blank">click here</a>.</p><p> Quick link to NCES Data Tools: <a href="http://nces.ed.gov/datatools/index.asp?DataToolSectionID=4" target="_blank">http://nces.ed.gov/datatools/index.asp?DataToolSectionID=4</a></p><p> Quick link to Quick Tables and Figures: <a href="http://nces.ed.gov/quicktables/" target="_blank">http://nces.ed.gov/quicktables/</a></p><p> Quick link to NCES Fast Facts (Note: The primary purpose of the Fast Facts website is to provide users with concise information on a range of educational issues, from early childhood to adult learning.): <a href="http://nces.ed.gov/fastfacts/" target="_blank">http://nces.ed.gov/fastfacts/#</a></p><p>See all <a href="/data-resources/">data and resources</a> »</p>
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  • <h3>HUD State of the Cities Data Systems</h3><p><strong><img width="200" height="200" alt="" src="/live/image/gid/4/width/200/height/200/482_hud_logo.rev.1407788472.jpg" class="lw_image lw_image482 lw_align_left" srcset="/live/image/scale/2x/gid/4/width/200/height/200/482_hud_logo.rev.1407788472.jpg 2x, /live/image/scale/3x/gid/4/width/200/height/200/482_hud_logo.rev.1407788472.jpg 3x" data-max-w="612" data-max-h="613"/>The SOCDS provides data for individual Metropolitan Areas, Central Cities, and Suburbs.</strong> It is a portal for non-national data made available through a number of outside institutions (e.g. Census, BLS, FBI and others).</p><p> Quick link: <a href="http://www.huduser.org/portal/datasets/socds.html" target="_blank">http://www.huduser.org/portal/datasets/socds.html</a></p><p>See all <a href="/data-resources/">data and resources</a> »</p>
  • <h3>Internal Revenue Service: Tax Statistics</h3><p><img width="155" height="200" alt="" src="/live/image/gid/4/width/155/height/200/486_irs_logo.rev.1407789424.jpg" class="lw_image lw_image486 lw_align_left" srcset="/live/image/scale/2x/gid/4/width/155/height/200/486_irs_logo.rev.1407789424.jpg 2x" data-max-w="463" data-max-h="596"/>Find statistics on business tax, individual tax, charitable and exempt organizations, IRS operations and budget, and income (SOI), as well as statistics by form, products, publications, papers, and other IRS data.</p><p> Quick link to <strong>Tax Statistics, where you will find a wide range of tables, articles, and data</strong> that describe and measure elements of the U.S. tax system: <a href="http://www.irs.gov/uac/Tax-Stats-2" target="_blank">http://www.irs.gov/uac/Tax-Stats-2</a></p><p>See all <a href="/data-resources/">data and resources</a> »</p>
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  • <h3>Federal Reserve Economic Data (FRED®)</h3><p><strong><img width="180" height="79" alt="" src="/live/image/gid/4/width/180/height/79/481_fred-logo.rev.1407788243.jpg" class="lw_image lw_image481 lw_align_right" data-max-w="222" data-max-h="97"/>An online database consisting of more than 72,000 economic data time series from 54 national, international, public, and private sources.</strong> FRED®, created and maintained by Research Department at the Federal Reserve Bank of St. Louis, goes far beyond simply providing data: It combines data with a powerful mix of tools that help the user understand, interact with, display, and disseminate the data.</p><p> Quick link to data page: <a href="http://research.stlouisfed.org/fred2/tags/series" target="_blank">http://research.stlouisfed.org/fred2/tags/series</a></p><p>See all <a href="/data-resources/">data and resources</a> »</p>
  • <h3>Federal Aviation Administration: Accident & Incident Data</h3><p><img width="100" height="100" alt="" src="/live/image/gid/4/width/100/height/100/80_faa-logo.rev.1402681347.jpg" class="lw_image lw_image80 lw_align_left" srcset="/live/image/scale/2x/gid/4/width/100/height/100/80_faa-logo.rev.1402681347.jpg 2x, /live/image/scale/3x/gid/4/width/100/height/100/80_faa-logo.rev.1402681347.jpg 3x" data-max-w="550" data-max-h="550"/>The NTSB issues an accident report following each investigation. These reports are available online for reports issued since 1996, with older reports coming online soon. The reports listing is sortable by the event date, report date, city, and state.</p><p> Quick link: <a href="http://www.faa.gov/data_research/accident_incident/" target="_blank">http://www.faa.gov/data_research/accident_incident/</a></p><p>See all <a href="/data-resources/">data and resources</a> »</p>