The US government will now permanently sell off bad mortgages it takes over

The US Department of Housing and Urban Development (HUD) is making its pilot program for selling off bad mortgages a permanent fixture. This means the government will regularly offload these loans to private buyers instead of holding onto them.

The US government insures many mortgages through the Federal Housing Administration (FHA). When a homeowner defaults, the government pays the lender and takes over the loan. For years, HUD had a program to sell off these properties, but not the loans themselves. This rule change means HUD will now consistently sell the actual mortgage notes, without FHA insurance, to private investors. This shifts the risk of these defaulted loans from the government's books to private hands.