Foreclosures

Resolved that NAHB urge bank regulators to reduce the number of homeowners going into foreclosure by:

• Improving loan modification programs, such as Home Affordable Modification Program (HAMP), to require principal reductions when net present value tests support this option. Principal reduction should be paired with shared appreciation or other conditions to avoid the risks of moral hazard,
• Implementing further adjustments to refinancing programs, such as Home Affordable Refinance Program (HARP) and FHA Short Refinance, to allow for greater participation,
• Requiring second mortgages be incorporated into the protocol for handling non-performing loans and eligibility criteria for loan modifications.

Further resolved that NAHB support efforts to establish national servicing standards that include clear procedures for handling non-performing loans.

Further resolved that NAHB encourage states to develop best practices for handling non-performing loans so that servicers, investors and borrowers understand the rules. Establishing this protocol will ensure that all parties can take the appropriate steps in a prompt manner without fear of litigation.

Further resolved that NAHB support efforts to persuade America’s financial institutions to take more effective loan modification actions and institute reforms in mortgage servicing to help home owners who are in financial need that have behaved responsibly in handling their mortgage and other financial obligations avoid foreclosure.

Further resolved that NAHB urge banks to engage in transparent and effective forms of communication with borrowers to avoid unnecessary financial distress.

Further resolved that NAHB support alternatives to foreclosures, such as short sales and deeds-in-lieu of foreclosure, and encourages states to make these processes more efficient, and urge financial institutions and their regulators to implement more effective asset sale procedures and more diligent property maintenance practices.

Further resolved that NAHB seek program and policy changes to reduce the inventory of Real Estate Owned (REO) properties, such as:

• Permitting for-profit companies to fully participate in all aspects of the disposition of the REO properties, including the purchase, management, leasing, and rehabilitation of the properties,
• FHFA and FHA establishing financing options for builders and investors to purchase REO properties and increase the caps on the number of GSE loans an investor can have,
• Modifying existing federal housing programs, such as the FHA Section 203(k) program, to allow investor participation in disposing of REO properties,
• Facilitating the creation of investor lease-to-own programs that can be operated at scale,
• Fannie Mae, Freddie Mac and FHA revising their condo policies to provide needed liquidity to reduce the excessive inventory, such as flexibility with regard to owner-occupancy ratios, investor ownership ratios, pre-sale requirements and delinquent HOA assessments.
• State housing finance agencies (HFAs) should be granted additional authority to assist troubled mortgage borrowers and speed the absorption of foreclosed homes.

Resolution originally adopted: 2012.2, Resolution No. 6

Committee with primary jurisdiction:

• Housing Finance Committee