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Federal Housing Authority Program Sells Distressed Loans To Investors

Twelve percent of Arizonans default on home loans, according to the Arizona Department of Housing’s October report.

Several state and federal programs provide financial assistance. One Federal Housing Authority program sells delinquent home-loans to private investors.

Laurie Goodman, Co-Director of the Housing Finance Policy Center at the Urban Institute, said the FHA is very limited in the types of modifications it can do when a borrower goes into default. She said the FHA has no other option for some loans than to sell them to private investors.

"They are on average 28 months delinquent," Goodman said. "They’re not eligible for anything else from FHA. One hundred percent of these loans would go to foreclosure."

Goodman said the FHA cannot do what private investor loans can do, including cutting interest rates, reducing to modify loans and offering short sales.

FHA programs that sell to private investors are at the national level, long after local options have been exhausted.

Jose Velasquez, Housing Counselor at Newtown Community Development Corporation, said his agency offers credit counseling, budgeting and financial coaching to local borrowers who have trouble making payments. Velasquez works mostly with first-time home buyers.

“You can always count on losing the job, cutting of hours, you name it, but other than that...in general, it’s a pretty good success rate,” Velasquez said of the local FHA programs.

Save Our Home AZ is a statewide Arizona Housing Authority program to help homeowners avoid foreclosure. Since its inception in 2010, the program has paid $176.7 million to homeowners.

Heather van Blokland was a host at KJZZ from 2016 to 2021.