The Obama administration has announced additional support to help homeowners struggling with unemployment through two targeted foreclosure-prevention programs. Through the existing state housing finance agency (HFA) fund for the hardest-hit housing markets – the HFA Hardest Hit Fund – the U.S. Treasury Department will make $2 billion of additional assistance available for HFA programs for homeowners struggling to make their mortgage payments due to unemployment.
Additionally, the U.S. Department of Housing and Urban Development (HUD) will soon launch a complementary $1 billion Emergency Homeowners Loan Program to provide assistance – for up to 24 months – to homeowners who are at risk of foreclosure and have experienced a substantial reduction in income due to involuntary unemployment, underemployment or a medical condition.
President Obama first announced the Hardest Hit Fund in February to allow states flexibility in determining how to design and implement programs to meet the local challenges homeowners in their state are facing.
Under the additional assistance announced today, states eligible to receive support have all experienced an unemployment rate at or above the national average over the past 12 months. Each state will use the funds for targeted unemployment programs that provide temporary assistance to eligible homeowners to help them pay their mortgage while they seek re-employment, additional employment or undertake job training.
States that have already benefited from previously announced assistance under the Hardest Hit Fund may use these additional resources to support the unemployment programs previously approved by the Treasury, or they may opt to implement a new unemployment program. States that do not currently have Hardest Hit Fund unemployment programs must submit proposals to the Treasury by Sept. 1.
Seventeen states and the District of Columbia are eligible to receive funds through the additional assistance, with allocations based on their population sizes. Beyond the states previously approved under the Hardest Hit Fund, funds will go to Alabama, Georgia, Illinois, Indiana, Kentucky, Mississippi, New Jersey, Tennessee and Washington, D.C.
This new HUD program will provide assistance to homeowners in areas that may not be included in the hardest-hit target states. Those areas are still being determined, the administration says.
The program will work through a variety of state and nonprofit entities and will offer a declining balance, deferred payment ‘bridge loan’ (i.e., a 0% percent interest, nonrecourse, subordinate loan) for up to $50,000 to assist eligible borrowers with payments on their mortgage principal, interest, mortgage insurance, taxes and hazard insurance for up to 24 months.
Under the program, eligible borrowers must be at least three months delinquent on their payments and have a ‘reasonable likelihood’ of being able to resume repayment of their mortgage payments and related housing expenses within two years; have a mortgage property that is the principal residence of the borrower and must not own a second home; and demonstrate a good payment record prior to the event that produced the reduction of income.
HUD says it will announce additional details, including the targeted communities and other program specifics, when the program is officially launched in the coming weeks.
SOURCE: U.S. Treasury Department