The Preserving Homes and Communities Act of 2026 imposes conditions on bulk or group sales of non‑performing single‑family mortgage loans by the Federal Housing Administration and the housing enterprises (Fannie Mae and Freddie Mac). It creates buyer priority for public and nonprofit actors, requires exhaustion of loss‑mitigation options before sales, establishes a first‑look pathway for qualified buyers of post‑foreclosure properties, and demands expanded data collection and public reporting.
The bill matters because it changes how distressed mortgage pools can be monetized: it directs a portion of foreclosure outcomes toward owner‑occupants, nonprofits, or affordable rental outcomes; raises operational and compliance obligations for servicers, purchasers, and the agencies; and builds new transparency and enforcement mechanisms intended to protect borrowers and neighborhoods while the agencies manage capital needs.
At a Glance
What It Does
Conditions the sale of FHA‑insured and GSE non‑performing and re‑performing single‑family loans on buyer eligibility, borrower notice and loss‑mitigation exhaustion, and post‑sale obligations for purchasers, plus a first‑look program for qualified buyers of HUD‑related REO properties.
Who It Affects
Servicers and investors who buy pools of distressed loans, HUD and the Enterprises (and their regulators), municipalities, land banks, and nonprofit housing organizations, and households with insured mortgages that become delinquent.
Why It Matters
It redirects a portion of distressed housing stock toward community‑oriented outcomes, creates new compliance and reporting burdens across the loan‑sale pipeline, and ties market access for purchasers to specified borrower protections and post‑sale use constraints.
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What This Bill Actually Does
The bill adds a new statutory framework that governs how FHA, Fannie Mae, and Freddie Mac may sell non‑performing single‑family mortgage loans in bulk. Before a loan can be included in a sale, loss‑mitigation avenues must have been exhausted and borrowers and other owners of record must receive written notice well in advance.
The statute also bars sales while a borrower is in forbearance or within 90 days after a forbearance ends. For direct sales by HUD of FHA loans, the law narrows eligible purchasers to municipalities, land banks, and nonprofit organizations unless HUD’s broader sale conditions are met.
Purchasers who acquire loans under the statute take the loans subject to enforceable post‑sale obligations: they must offer loss mitigation that is at least as favorable as the agencies’ guidelines (including no loss‑mitigation fees), provide deferral options comparable to partial‑claim treatments for certain borrowers, publicly disclose post‑sale loss‑mitigation programs, maintain vacant properties and pay local property taxes until title is transferred, and are generally prohibited from selling via contract‑for‑deed or lease‑to‑own arrangements unless the buyer is a nonprofit.Where foreclosure is unavoidable, the statute imposes an affirmative disposition goal: three‑quarters of properties acquired through foreclosure must be transitioned to owner‑occupants, transferred to nonprofits or governments that will pursue owner‑occupant or specified affordable rental outcomes, or be leased to lower‑income tenants under 10‑year affordability terms — with specified definitions of allowable income sources and rent ceilings — or, if uninhabitable, demolished with donation to a land bank. The bill creates a ‘Claims Without Conveyance of Title (CWCT) First Look’ program giving owner‑occupants, approved nonprofits, and public entities an exclusive early opportunity to acquire HUD REO at at‑or‑below‑market prices for approved affordable uses.Finally, the statute layers data and enforcement requirements on top of these use and borrower protections.
Purchasers must provide quarterly, loan‑level reporting for four years after a sale that includes loan performance, loss‑mitigation outcomes, and demographic fields; agencies must publish semiannual, pool‑level reports and conduct fair‑lending analyses. Regulators can force the return of loans or properties from noncompliant purchasers without compensation and may impose monetary penalties and bar repeat offenders, and HUD must issue implementing regulations within 18 months of enactment.
The Five Things You Need to Know
The statute bars sale of any FHA or enterprise‑owned single‑family loan while it is in a forbearance plan and for 90 days after a forbearance ends.
Purchasers must ensure that, for foreclosed properties where home‑retention is impossible, at least 75% are sold to owner‑occupants, transferred to qualifying nonprofits/local governments for affordable outcomes, or leased under 10‑year affordable terms (rent ≤30% of income; tenants ≤100% AMI).
HUD and the Enterprises must collect quarterly loan‑level data from purchasers for four years after each bulk sale, including loan characteristics, loss‑mitigation actions, charge‑offs/resales, and borrower demographics (race, national origin, sex, ZIP Code, census tract; disability/veteran status if available).
A CWCT First Look program gives pre‑approved nonprofits, eligible public entities, and owner‑occupant buyers an exclusive early purchase window for HUD REO, conditioned on commitments for rehabilitation, sale or long‑term affordable use.
Regulators may forcibly retain noncompliant loans or properties without compensating purchasers and may impose additional penalties — including monetary fines and exclusion from future sales — for repeated violations.
Section-by-Section Breakdown
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FHA single‑family loan sale controls
This provision establishes the statutory baseline for FHA‑insured single‑family non‑performing loan sales: sales are discretionary and only permissible when other reasonable measures cannot restore or preserve the Mutual Mortgage Insurance Fund’s capital standard. It requires HUD to set a priority mechanism favoring governments and qualified nonprofits, mandates borrower notice and loss‑mitigation exhaustion, and creates a package of buyer obligations (loss‑mitigation parity, deferral options, public disclosure, property maintenance, and limits on risky post‑sale sales models). Practically, servicers and HUD will need to integrate these requirements into pre‑sale workflows and contract terms and to document loss‑mitigation efforts to pass regulatory review.
Purchaser obligations and property disposition rules
This subsection translates public‑policy outcomes into enforceable sales conditions: purchasers inherit loss‑mitigation duties, must preserve vacant property and tax obligations, cannot use certain seller‑financing structures except for nonprofits, and face a 75% disposition target for foreclosed properties with tight affordability and tenant‑income criteria. For purchasers and originators this imposes ongoing asset‑management duties and constrains resale strategies; for local governments and nonprofits it creates clearer paths to acquire and repurpose REO but also requires capacity to rehabs and long‑term compliance tracking.
Exclusive early acquisition window for HUD REO
The CWCT First Look program gives eligible owner‑occupants, pre‑approved nonprofits, and public entities a time‑limited exclusive right to buy HUD‑related REO at or below market value for specified uses (owner‑occupancy, shared‑equity models, affordable rental, limited demolition). The law sets prequalification standards for nonprofit buyers, allowable end uses and reporting obligations, and requires agencies to permit inspections. Operationally HUD must create application and preapproval processes, valuation adjustments, and monitoring tools to enforce rehab timelines and affordability covenants.
Data collection, public reporting, and fair‑lending review
Both the FHA and enterprise pathways require robust loan‑level reporting: purchasers must submit quarterly data for four years and agencies must publish semiannual, pool‑level reports and run fair‑lending analyses. The required fields include performance, loss‑mitigation outcomes, resales/charge‑offs, and sensitive demographic identifiers. Agencies will face design choices about data formats, PII protections, aggregation thresholds, and publication formats to balance transparency with privacy and legal constraints.
Parallel constraints for Fannie Mae and Freddie Mac
The Enterprises must meet substantially similar conditions before conducting bulk auctions or group sales of non‑performing or re‑performing loans: buyer prioritization, notice and exhaustion of mitigation, prohibitions on sales during/shortly after forbearance, purchaser loss‑mitigation duties, and reporting. Because the Enterprises are major buyers and securitizers of mortgage risk, these constraints are likely to reshape bulk trading pools, pricing, and the universe of viable buyers for large REO portfolios.
Enforcement tools and regulatory timetable
The statute authorizes aggressive enforcement tools — forcible retention of assets from noncompliant purchasers without compensation, monetary penalties, and debarment from future sales — and directs the Secretary/Director to issue regulations defining sale terms. HUD specifically has an 18‑month window to promulgate implementing rules, which will be the driver of operational detail and compliance deadlines for market participants.
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Explore Housing in Codify Search →Who Benefits and Who Bears the Cost
Every bill creates winners and losers. Here's who stands to gain and who bears the cost.
Who Benefits
- Local governments and land banks — Receive a prioritized path to acquire distressed properties and tools to stabilize neighborhoods through acquisition, rehab, and controlled disposition.
- Community nonprofits and community land trusts — Get a formal first‑look and priority pathway and clearer mandates to secure properties for affordable ownership or long‑term affordable rental programs.
- Owner‑occupant buyers and tenants with limited incomes — Expand access to purchase or lease foreclosed homes at affordable terms through targeted disposition goals and the CWCT program.
- Borrowers in loss mitigation — Gain enforceable post‑sale protections: purchasers must offer loss mitigation comparable to agency standards, and violation can be used as a defense against foreclosure.
- HUD/FHA fund and public stakeholders — The statute forces the agencies to balance capital preservation with community outcomes and creates transparency intended to reveal whether sales reduce systemic risk or harm borrowers.
Who Bears the Cost
- Private investors and hedge funds that specialize in buying distressed loans — Face constrained bidding opportunities, additional asset‑management duties, and use restrictions that lower expected returns.
- Mortgage servicers — Must document exhaustive loss‑mitigation efforts, manage extended borrower communications, and coordinate with purchasers and agencies, increasing operational burdens and compliance costs.
- Fannie Mae and Freddie Mac (and their regulator) — Will incur program design, monitoring, and enforcement costs and may see changes in bulk market liquidity and pricing that affect balance‑sheet management.
- Smaller property investors and mom‑and‑pop buyers — May be excluded from purchase opportunities because the statute reserves priority for governments/nonprofits and attaches long‑term use constraints.
- HUD and agency staff — Required to design priority systems, run fair‑lending analyses, manage preapproval processes for nonprofits, publish data, and administer enforcement — all of which carry resource needs not explicitly funded in the text.
Key Issues
The Core Tension
The bill tries to reconcile two legitimate goals that pull in opposite directions: protecting borrowers and neighborhoods by steering distressed properties toward owner‑occupants and community stewards, versus preserving market liquidity and recoveries by allowing broad access and simple sale mechanics. Tight sale conditions and use restrictions protect communities but reduce prices and buyer interest; loosen those constraints to improve recoveries and liquidity, and you risk faster disposals that may harm borrowers and neighborhoods.
The statute creates meaningful protections for borrowers and neighborhoods but does so by constraining a market — that raises tradeoffs. Conditioning sales on purchaser conduct and mandating disposition outcomes will likely depress prices and reduce the set of bidders, which lowers immediate recoveries to the insurance fund or enterprises.
Lower recoveries can work against the bill’s stated financial aims unless the agencies capture other efficiencies or the redeployment of properties into stabilized occupancy reduces long‑term public costs.
Implementation will hinge on regulatory detail. The bill leaves much to agency rulemaking: how to operationalize priority ranking, what constitutes adequate nonprofit capacity, how to value ‘‘at or below fair market’’ in the CWCT program, and how to aggregate or redact sensitive demographic fields in public reports.
The punitive enforcement tool allowing forcible retention of assets without compensation is powerful but legally and operationally fraught — it could trigger litigation under takings or contract doctrines and will require clear procedural safeguards. Data collection ambitions (race, national origin, disability) promote accountability but raise privacy, fair‑lending statistical validity, and matching challenges that the agencies must solve.
A final practical tension arises between borrower protections and market incentives: purchasers facing strict resale constraints and long‑term affordability covenants may steer clear of bulk auctions, pushing more assets into ad hoc channels where protections could be weaker. Conversely, well‑designed preapproval and financing supports for nonprofits and public entities could expand community capacity to comply, but that outcome depends on execution and likely funding that the bill does not directly provide.
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