U.S. Rep. Blaine Luetkemeyer (MO-03) issued the following release after Housing and Urban Development (HUD) Secretary Julian Castro discussed major changes to the treatment of nonperforming loans during his testimony before the House Financial Services Committee.

“The content of HUD’s changes to nonperforming loans raises legitimate questions about whether Secretary Castro has been swayed by political pressure to make changes to the Federal Housing Administration and the Distressed Asset Stabilization Program that help special interests at the expense of American taxpayers,” Luetkemeyer said. “Let me be clear: the changes outlined by Secretary Castro pose a threat not just to American taxpayers, but to first time and low income borrowers who depend on a strong FHA and Mutual Mortgage Insurance Fund.  That’s the same fund that taxpayers bailed out just a few years ago, and that has only recently inched above its statutory capital ratio and still well below its reserve requirement. Eliminating an open process that allows these loans to be sold in a competitive marketplace means that taxpayers will likely be the ones left holding the bag.”

Recently, HUD announced a new plan to require investors to offer principal reduction for all occupied loans and created a new requirement that loan modifications be fixed for a minimum of five years with a limitation on subsequent increases to one percent per year. The plan could allow nonperforming loans to be offered at below-market rates and based not on an entity’s bid but rather on a purported mission.