WASHINGTON — Buyers of nonperforming Federal Housing Administration loans will have to evaluate borrowers for principal reductions and abide by new restrictions issued by the Department of Housing and Development on Thursday.

"Certain families with distressed mortgages insured by FHA may soon be eligible for a reduction of their outstanding loan amounts should their mortgages be sold through the Distressed Asset Stabilization Program," HUD said in a press release.

HUD announced more than 10 enhancements to the program that have been advocated by consumer groups and members of Congress.

Besides principal forgiveness, the FHA is prohibiting nonperforming loan buyers and investors from "walking away" and abandoning vacant properties.

"This prohibition will stem the proliferation of blighted properties that limit recovery in struggling communities, and it also appropriately aligns FHA requirements applicable to servicers of these loans both before and after sale," said Rob Grossinger, president and chief executive of the National Community Stabilization Trust.

The FHA also announced that it will be releasing performance and outcome data for each pool of nonperforming loans acquired by investors.

"Today’s changes will support better outcomes for homeowners and communities alike," Grossinger said.

The Center for American Progress also welcomed the changes to the program, including protections from payment shock on modified loans. The new requirements limit interest rate increases to no more than 1% a year after the initial five-year fixed rate expires.

"By requiring investors to offer loan modifications that are more affordable and sustainable, the FHA can give homeowners a more powerful toolkit for staying in their homes," said Sarah Edelman, director of housing policy at the center.

HUD has also pledged to sell 10% of its nonperforming loans to nonprofits and local governments. "FHA will enhance its efforts to identify and offer loans in targeted dIstressed areas to interested non-profits and local governments," the agency said.

Since 2012, HUD has sold nearly 100,000 severely delinquent loans.

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