In 2012, the US Department of Housing and Urban Development’s Federal Housing Administration (FHA) significantly increased its sale of pools of distressed FHA-insured mortgages through a program called the Distressed Asset Stabilization Program (DASP). The program has a dual purpose:to return and protect FHA’s Mutual Mortgage Insurance(MMI) capital reserves fund to a positive position and “to encourage public/private partnership to stabilize neighborhoods and home values in critical markets.”
This report focuses on the FHA’s Distressed Asset Stabilization Program (DASP). The DASP has the potential to both recuperate needed funds for its mortgage insurance fund and preserve homeownership and create affordable rental housing. Instead, the FHA has designed DASP in such a way as to severely limit its effectiveness in helping hard-hit neighborhoods recover from the housing crisis.