HUD to offer nonprofits first look at 50% of vacant property note sale

The Department of Urban Development dramatically increased the share of mortgage notes it plans to give community organizations first crack at in an upcoming sale.

On Nov. 10, HUD will give potential nonprofit, state and local buyers priority on 50% of loan pools containing 1,730 notes associated with vacant reverse mortgage properties. Typically just 10% of notes HUD puts up for bid are offered first to these types of buyers.

The sale will test the effectiveness of offering higher shares of note sales to community organizations, which is in line with some of the Biden administration’s affordable housing goals.

Reaching out to more of these types of bidders is intended to increase the likelihood that the properties will end up housing higher numbers of those who earn less than 120% of the area median family income for homeowners or less and or equal to 80% of that for renters.

“This sale provides greater opportunities for nonprofits and local governments to purchase properties that can then be made available for affordable homeownership to and support neighborhood revitalization,” said Lopa Kolluri, principal deputy assistant secretary for housing at HUD, in a press release.

The department held the notes on the properties in question because the Federal Housing Administration insured the loans involved and the mortgages were assigned to HUD.

Loans most typically get assigned to HUD because the debt is high relative to the value of the property involved or the maximum claim amount.

No surviving borrowers or non-borrowing spouses have a claim on the properties involved in the sale any longer and the time allotted for heirs to come forward with claims on the properties has elapsed, according to HUD.

Reverse mortgages insured by the FHA are loans aimed at allowing consumers 62 and up to borrow against their equity while still living in their homes as they age, so long as they can maintain obligations associated with the properties involved.