It isn’t easy being sleazy, but if there’s a buck to be made somewhere in the financial sector, even if it means kicking people out of their homes, you won’t have to look far to find a hedge fund that will stoop low enough to do it.

The most recent example of this truism is the Department of Housing and Urban Development’s distressed asset sale program. This FHA/HUD program has been operating for several years now, and has been selling off batches of mortgages that were approaching or in foreclosure for as little as 70 cents on the dollar.

According to media sources, Democratic Massachusetts Senator Elizabeth Warren is planning to join other lawmakers and community activists at a rally in Washington DC on Wednesday to oppose the distressed mortgage sales program.

Knowledgeable sources note the liberal firebrand senator will make remarks calling for HUD to make changes in the distressed asset sale program make it easier for nonprofit organizations to bid for the bundles of foreclosed mortgages.

Distressed Mortgage Sales

More on HUD distressed mortgage sales and the Wednesday rally in Washington

Both the very concept and the execution of distressed mortgage sales by HUD and government-sponsored mortgage finance firms has been recently criticized by housing advocates and some political figures. The critics of the program argue that the private buyers of distressed mortgages are putting the borrowers of mortgages they buy into foreclosure as soon as possible instead of modifying the loans to keep the mortgage holders in their homes as the government had hoped.

Criticism has been particularly heavy for Lone Star Funds, a $60 billion private equity firm based in Texas. The PE firm has raised billions of dollars from investors, including public pensions [incensed editorial aside — jeez…really? what has happened to morality and basic common sense?], to invest in distressed mortgages.

Of note, the private equity firm’s dubious practices in handling the mortgages and the delinquent borrowers was discussed in some detail in The New York Times earlier this week.

The affordable housing advocate organizations say they plan to protest outside of Lone Star’s offices in Washington following the public rally to be attended by  several members of Congress.

Financial and consumer advocate ValueWalk also recently published a report regarding abuse of the HUD foreclosed mortgage sale program by private equity and hedge funds.

UPDATE: HUD emailed ValueWalk the following statement:

Statement by Edward L. Golding, HUD’s Principal Deputy Assistant Secretary for the Office of Housing

September 30, 2015

 

 

“This morning, my senior team and I met with a group of local community-based leaders to discuss the important issues related to the lingering effects of the foreclosure crisis that continue to grip certain neighborhoods across the nation.    We discussed how HUD and FHA might make better use of one of its tools, the Distressed Asset Stabilization Program (DASP), tofurther the Department’s goal of stabilizing communities  and assisting them as they, and their public-minded partners, work to address severely distressed mortgages that are on the verge of foreclosure.  FHA recently made significant changes to this program, including expanding our outreach to participating nonprofit organizations and requiring a 12-month delay in finalizing any foreclosure action to allow struggling families a greater opportunity to remain in their homes or find another sustainable housing solution.

 

“This meeting offered an important, constructive and meaningful opportunity to discuss broad goals we support with these community leaders.   We are, and will continue to be, a strong and consistent supporter of those who toil on the front lines of our housing recovery.  FHA takes its mission very seriously.  Every day, we work to make sure households have access to affordable mortgage credit and to ensure the agency’s insurance funds remains viable for many millions of households who depend upon FHA.  We will continue to explore all responsible options to avoid unnecessary foreclosures while keeping FHA healthy and available for future generations of homeowners. “