This legislation, titled the "Preserving Homes and Communities Act of 2026," significantly amends the process for selling single-family non-performing mortgage loans by the Federal Housing Administration (FHA). It permits such sales only if necessary to maintain the FHA Fund's capital requirements and mandates a system prioritizing Federal, State, local, or Tribal governments and nonprofit organizations with experience in promoting affordable housing and neighborhood stabilization. Crucially, all applicable loss mitigation measures must be exhausted before a loan is sold, and borrowers must receive clear, written notice 90 days prior to inclusion in any sale, detailing the process and available protections. Purchasers of FHA non-performing loans must adhere to stringent requirements, including providing loss mitigation options at least as favorable as FHA guidelines and offering deferral programs to eligible borrowers. They are also prohibited from using certain predatory contracts like contract for deed or lease-to-own arrangements, except with nonprofit organizations. For properties acquired through foreclosure where home retention is not possible, 75 percent must be sold to owner-occupants, donated to non-profits, or leased as affordable housing for low-to-moderate income tenants, accepting various legal sources of income. The bill also establishes an FHA " Claims Without Conveyance of Title First Look Program ," granting an exclusive right to eligible buyers to purchase foreclosed properties at or below fair market value. Eligible buyers include owner-occupants, pre-approved nonprofit organizations focused on affordable housing or community revitalization, and government agencies. These properties must be used for specific allowable purposes, such as renovation and sale to owner-occupants, creation of affordable homeownership through land trusts, or rental to low-income tenants for at least ten years. For Fannie Mae and Freddie Mac, the bill imposes similar requirements for bulk auctions or group sales of both non-performing and re-performing loans . These enterprises must prioritize sales to mission-driven entities, ensure loss mitigation is exhausted for non-performing loans, and provide comprehensive borrower notices. Purchasers of these loans face comparable obligations regarding loss mitigation, deferral programs, and specific disposition requirements for foreclosed properties to support affordable housing outcomes. Across all regulated sales, the bill prohibits the sale of loans currently in forbearance or within 90 days of a forbearance plan's end. It mandates extensive data reporting by purchasers on loan treatment and outcomes, including borrower demographics, for a four-year period. The Secretary and Director must submit semiannual public reports to Congress, including a fair lending analysis to identify any discriminatory impacts, and are empowered to enact penalties, including forcibly retaining loans or properties, for non-compliance with these requirements.