The Michigan State Housing Development Authority (MSHDA) plans to use federal funding to finance three new foreclosure-prevention initiatives: the Unemployment Mortgage Subsidy Program, the Loan Rescue Program and the Principal Curtailment Program.
Together, the programs are projected to help more than 16,000 borrowers avoid foreclosure, says the MSHDA, which received a $154.5 million allocation from the Treasury Department in February as part of the Obama administration's HFA Hardest-Hit Fund. The fund offers money to state housing finance agencies in economically depressed, high-foreclosure states to develop new loss mitigation programs.
The Unemployment Mortgage Subsidy Program will subsidize up to half of the required monthly mortgage payment for borrowers who are unemployed while they seek new employment, the MSHDA says. Homeowners who have lost their job through no fault of their own and qualify to receive unemployment benefits will apply for assistance through their lender, who will, in turn, transmit the application to the MSHDA for approval.
Unemployed homeowners will be eligible to receive monthly subsidies, paid directly to the lender or servicer, of up to $750 or 50% of the required monthly principal, interest, taxes and insurance mortgage payment. Assistance will be provided for two months after the homeowner returns to work, and the maximum length of assistance will be 12 months.
Almost 65% of the MSHDA's total allotment will be directed to this program.
The MSHDA intends to use 10% of the state's Hardest-Hit Fund award for the Loan Rescue Program, which will provide up to $5,000 in assistance to households that can "now sustain homeownership, catch up on delinquent payments and avoid foreclosure," the agency says. In many cases, the Loan Rescue Program will be coordinated with existing mortgage modification programs to help borrowers restructure their mortgage to sustain homeownership.
About 20% of the state's Hardest-Hit Fund allotment will go toward the Principal Curtailment Program. This program will provide a one-time matching funding of up to $10,000 to homeowners seeking to modify their loans. The lender or servicer must agree to provide matching forgiveness of principal overhang and to modify the reduced loan balance consistent with program requirements. The MSHDA expects the program to benefit, in particular, recently unemployed borrowers who are re-employed at lower salaries.
The MSHDA consulted with several outside partners during the initial development of this plan, including the Michigan Bankers Association, the Michigan Credit Union League, the Michigan Association of Community Bankers, the Michigan Association of Realtors, the Michigan Foreclosure Task Force, and MSHDA's statewide homeownership counseling network.
Additionally, servicing staff from a selection of community, regional and national loan servicers participated in sessions intended to begin aligning the application process, data requirements, and associated procedures with existing lender/servicer systems and infrastructure.
Most of the local, regional and national loan servicers have agreed to integrate the Hardest-Hit Fund Programs outlined herein into their current loss mitigation waterfall process, the agency adds.
The MSHDA intends to administer the three programs through a nonprofit corporation that was set up specifically for the purpose of being an "eligible entity" under the Hardest-Hit Fund.