HUD announces upcoming sale of vacant properties

The Department of Housing and Urban Development announced an upcoming sale of vacant loans secured by home equity mortgage conversion.

HVLS 2024-2 will be offered on May 7 and includes approximately 1,265 notes with loan balances of nearly $346 million. The sale consists of due and payable home loans provided as security by first lien HECMswhere borrowers and non-borrowing spouses are now deceased, according to the HUD asset sales office announcement.

Nonprofits, government agencies and for-profit companies are all eligible to bid on the sale. HUD will also consider offers from joint ventures and other multi-enterprise partnerships.

First introduced in 2016, HUD job loan sales emerged as a means to help increase supply through asset sales. As much as 50% of an offering is sometimes prioritized for nonprofits and government organizations hoping to provide housing, including homeownership opportunities for residents earning less than 120% of the area median income. Unlike previous HVLS auctions, the latest announcement made no mention of designated allocation for specific buyer segments.

In the first half of 2023, nonprofits purchased 28% of all HVLS loans for sale since the program launched, HUD said in a report late last year. The number of loans settled totaled 10,280.

An approximately 52% share of loans sold through HVLS comes from 10 states. Florida topped the list with 13%, while Texas was in second place with 7%. California, Illinois and New York all followed with 5% each.

The latest sale comes as housing affordability and inventory issues rise in public consciousness President Biden made the nation’s housing situation a major talking point in his recent State of the Union address. Creating more units was a focus of the Biden administration’s housing action plan, first announced a year ago. At the end of 2020, Freddie Mac estimated that the U.S. was 3.8 million units short of adequately meeting demand.

HECMs, a Federal Housing Administration-supported product offered to homeowners age 62 or older, allows older borrowers to tap into equity in their own homes as they age, and are assigned to HUD from previous servicers when the balance reaches 98% of maximum claim amounts. Instead of foreclosing on homes when borrowers die, the agency offers loans for sale to avoid sales fees and help the housing industry generate supply.

Finance of America currently comes in as the best HECM in the country originator with nearly a third of total volume, according to data from Reverse Market Insight. Mutual of Omaha Mortgage comes in second with about 22% of new loans.