CWCOT Has Saved the U.S. Government $10 Billion and Generated $705 Million in Surplus for Distressed Homeowners. How it Could Do Even More.
There’s a government program that has saved the U.S. government an estimated $10 billion and generated more than $705 million in surplus funds for distressed homeowners over the last 12 years even while supplying affordable housing and boosting homeownership rates in neighborhoods across the country.
And it could do even better.
The Urban Institute recently analyzed the effectiveness of the Claims Without Conveyance of Title (CWCOT) program administered by the Federal Housing Administration (FHA). The analysis used FHA reporting data along with proprietary data from Auction.com, which conducts more than half of all property auctions that flow through CWCOT.
Urban found that CWCOT has benefited the FHA, the housing market and even distressed homeowners facing foreclosure.
- CWCOT has reduced foreclosure-induced losses to FHA’s Mutual Mortgage Insurance by $10 billion over the last 12 years by allowing properties to be sold via competitive auctions rather than through traditional listing channels, which require mortgage servicers to go through a lengthy and costly process of conveying a property to the U.S. Department of Housing and Urban Development (HUD).
- CWCOT has generated more than $705 million in surplus funds for distressed homeowners through its competitive foreclosure auctions. Surplus funds can go back to the distressed homeowner after any subordinate liens are paid off, and foreclosure auctions represent the last chance for homeowners to walk away with any equity in the home being foreclosed.
- CWCOT gets affordable homes back on the market more quickly than the conveyance and traditional listing method. Auction.com data shows homes sold through a competitive auction are returned to the market 466 days faster and that those homes are still affordable, requiring 29.6 percent of the local family income to buy on average.
- CWCOT gets more formerly distressed homes into the hands of owner-occupants. Auction.com data shows that the homeownership rate for renovated resales of homes sold via CWCOT is 73 percent, 12 points higher than the homeownership rate for the traditional conveyance and listing channel.
Even with all this success, the Urban analysis found room for improvement in the CWCOT program.
- Provide a better mechanism to adjust pricing for competitive CWCOT auctions.
- Ensure the reserve price at auction allows for a larger discount on occupied properties.
- Require CWCOT program servicers to participate in a competitive auction for both first- and second-chance auctions
Read more about these recommendations along with background on the CWCOT program in this Urban Institute article summarizing its analysis.