The state housing finance agencies expected to receive federal funding through President Obama's recently announced market-stabilization program are, like everybody else, learning the program's details as they come.
Last Friday, Obama told an audience in Las Vegas that the $1.5 billion program will ‘allow housing finance agencies in the places hardest hit by the housing crisis find innovative ways to help homeowners stay afloat, and empower local agencies that know these communities best.’
According to a fact sheet published on the White House's Web site, the funding, which was earmarked for housing under the Emergency Economic Stabilization Act of 2008 (EESA), will go toward housing agencies in states where home prices have dropped by 20% or more since their peak – Nevada, Arizona, Florida, California and Michigan.
The Treasury Department, using a formula based on states' home-price declines and unemployment levels, will announce maximum state-level allocations in the next two weeks, as well as parameters around how the agencies may use the funds. The agencies will then have to submit program designs for Treasury approval.
The administration's fact sheet notes that programs for unemployed borrowers, underwater borrowers and second liens are examples of programs that would be considered for eligibility.
Evan Gerberding, a spokesperson for the California Housing Finance Agency, says the organization is awaiting more information on how much money it will receive before announcing possible program designs.
‘We're anxious to get that information but we're told we may not know for two weeks exactly what our allocation will be,’ she tells MortgageOrb. ‘Once we have some idea of what the allocation is, then we can develop programs, and we'll move quickly once we know how much of that $1.5 billion we'll be getting.’
Kristina Fretwell, legislative liaison for the Arizona Department of Housing, notes that the program will ‘be all new for us.’ The department has, nonetheless, been discussing with various groups alternative foreclosure-prevention strategies.
‘We have a number of groups here, including the Arizona Foreclosure Prevention Task Force, that we've been working with – kind of brainstorming with – because we know the federal program's not really hitting the nail on the head,’ Fretwell says in regard to the Home Affordable Modification Program.
Although details on the program are scarce, several observers, including New York's superintendent of banks, Richard Neiman, say putting the program design in the hands of local entities is a move in the right direction.
‘Several states have already demonstrated innovative leadership by creating emergency mortgage assistance programs to prevent foreclosures that stem from temporary unemployment,’ Neiman wrote in an e-mail response to BusinessWeek.
Andrew Jakabovics and David Abromowitz, housing policy analysts at the Center for American Progress, suggest the funds could go toward mediation programs, negotiating principal reductions and/or shared-equity approaches to homeownership.