Fannie Mae and Freddie Mac direct their servicers to initiate foreclosure proceedings at earlier stages than FHA, VA, and RHS. FHA, VA, and RHS officials said that they have public missions and obligations to their customers, such as low-income Americans, veterans, and rural residents, and take additional time to initiate foreclosure proceedings. FHA Property Custody Procedures Delay Maintenance and Marketing

VA, RHS, Fannie Mae, and Freddie Mac follow a similar approach in that the organizations, or servicers in the case of RHS, have custody of and are responsible for maintaining foreclosed properties from the time of the foreclosure sale until the properties are sold to home buyers or investors. In contrast, FHA divides property custody and maintenance responsibilities between its servicers and contractors, which operate largely independently of one another. In contrast, by dividing responsibility between servicers and contractors, FHA procedures prevent the initiation of all maintenance necessary to protect foreclosed properties and sell them quickly. Available Data Suggest FHA Takes Longer to Sell Foreclosed Properties

Determining the organizations’ comparative performance in selling foreclosed properties is difficult because FHA and RHS do not collect all of the data necessary to do so. On the basis of available data, we estimate that it takes about 55 to 110 days longer to sell foreclosed FHA properties than is the case for the other organizations. Available Data Suggest FHA Foreclosed Property Sales Performance Is Comparatively Slow

Table 6 provides available data on the time that elapsed in acquiring and selling FHA, VA, RHS, Fannie Mae, and Freddie Mac foreclosed properties in 2000, and the data indicates that FHA properties took the longest to sell, at 292 days. Appendix III: Comments from the Department of Veterans Affairs
What GAO Found

Federal programs in the Federal Housing Administration (FHA), the Department of Veterans Affairs (VA), and the Rural Housing Service (RHS) promote mortgage financing for low-income, first-time, minority, veteran, and rural home buyers. Congress has also chartered private corporations--Fannie Mae and Freddie Mac--to provide mortgage lending and to promote homeownership opportunities. Many homeowners fall behind in their mortgage payments each year due to unemployment, health problems, or the death of a provider. To avoid high cost foreclosure proceedings when home buyers fall behind on their obligations, FHA, VA, and RHS instruct mortgage servicers, typically large financial institutions, to assist the home buyers in bringing their mortgage payments current. Despite these efforts, in 118,000 cases in 2000 the mortgage servicers engaged in various foreclosure proceedings under the direction of the organizations. FHA procedures delay the initiation of critical steps necessary to preserve the value of foreclosed properties and to sell them quickly. Although Fannie Mae, Freddie Mac, VA, and RHS designate one entity as responsible for the custody, maintenance, and sale of foreclosed properties, FHA divides these responsibilities between its mortgage servicers and management and marketing contractors, which operate largely independently of one another. Determining the organizations' comparative performance in selling foreclosed properties is difficult because FHA and RHS do not collect all of the data necessary for comparison. However, on the basis of available data, it takes nearly 90 days longer to acquire and sell FHA foreclosed properties than VA properties, and about 130 to 145 days longer to acquire and sell FHA properties than RHS, Fannie Mae, and Freddie Mac properties.