Innovative Mortgage Resolution Fund Buys Distressed Loans

CHICAGO – A public-private partnership overseen by the Illinois Housing Development Authority (IHDA) is the winning bidder in an auction of 324 distressed residential mortgages in the Chicago area.

The Federal Housing Administration (FHA) announced Monday that the Mortgage Resolution Fund (MRF) won an FHA-sponsored auction of non-performing loans, paving the way for MRF to permanently modify the mortgages of qualifying households. The Chicago area was one of four metropolitan areas chosen by FHA for this loan sale. FHA chose the Chicago area because it has a high concentration of at-risk loans, and through this effort FHA hopes to promote neighborhood stability in struggling communities.

"This program creates the opportunity for everyone to walk away a winner - the homeowner, the Illinois Housing Development Authority, FHA, and the community at large," said Acting FHA Commissioner Carol Galante. "This program accomplishes two very important objectives- it supports communities hardest hit by the housing crisis and it saves considerable money for FHA's insurance fund."

Homeowners whose loans are being purchased will be contacted by MRF in the first quarter of 2012. MRF will permanently modify the mortgages of qualifying households to an affordable level and provide households not eligible for modification with support through property disposition and transition to new housing. The MRF Program is a holistic approach that brings each qualifying household’s mortgage debt into alignment with current home values while also requiring the household to bring all forms of debt in line with traditional and sustainable debt-to-income ratios. The MRF Program is free of charge to homeowners.

Funding for the loan purchase comes from the Hardest Hit Fund Program, a federal resource.

“This latest initiative demonstrates how Governor Pat Quinn’s administration is committed to creative solutions to stabilize communities”, said Mary R. Kenney, Executive Director of the Illinois Housing Development Authority. “It is an innovative and complicated use of HHF monies, demonstrating IHDA’s dedication to finding solutions for homeowners and communities threatened by foreclosure.”

MRF is a public-private partnership consisting of organizations that have served as national leaders in responding to the foreclosure crisis: Mercy Portfolio Services and Mercy Housing, Inc.; Enterprise Community Partners, Inc.; the Housing Partnership Network; and the National Community Stabilization Trust.

The loans are located in the Chicagoland area, leveraging other IHDA foreclosure prevention and community rebuilding efforts such as: the Illinois Building Blocks Program, which offers $10,000 in down payment assistance to qualified buyers of vacant single family homes in targeted communities; the Illinois Hardest Hit Program, which offers up to $25,000 in mortgage payment assistance to qualified homeowners who are unemployed or underemployed; and the Neighborhood Stabilization Program, which provides foreclosed properties to developers to rehabilitate for sale or rental.