A few days after awarding a
second round of funding to five states, the Obama Administration announced a $2
billion expansion of its Innovation Fund for the Hardest Hit Housing Markets
(the Hardest Hit Fund). At the same time
it said that the U.S. Department of Housing and Urban Development (HUD) will
initiate a $1 billion complementary program titled the Emergency Homeowners
Loan Program to provide assistance to homeowners who are at risk of foreclosure
because of a reduction in income due to un-or-under employment or a medical
condition.
The Hardest Hit Fund awards money
to state housing finance agencies(HFAs) agencies in states that have suffered the double whammy of high
unemployment and a drop of more than 20 percent in housing values. Funds can be used for specific programs
proposed by the agencies to facilitate short sales or loan modifications for
properties that are under water, and for subsidies for persons with temporary
financial difficulties while they are looking for a job or undergoing training.
Ten states have received awards since
the program was announced last February. READ MORE
States that have already received
Hardest Hit funds may use the additional money to support unemployment programs
previously approved by the Treasury Department or can implement a new
unemployment program. States that are
new to the program must submit proposals to Treasury by September 1 under
guidelines for allowable initiatives.
The new HUD program will provide
similar assistance to homeowners in local areas that have been hard hit by loan
delinquencies and high unemployment but are not located in the Hardest Hit
target states. HUD will work with
non-profit and government entities to provide up to $50,000 in zero interest,
non-recourse subordinate loans to assist eligible homeowners with mortgage,
property tax, and hazard insurance payments for up to 24 months.
In order to qualify for the program the
homeowner must:
- Be at least three months delinquent in 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 eligible borrowers may not own a second home;
- Demonstrate a good payment record prior to the event that produced the reduction of income.
HUD will announce further
regulations and the names of targeted communities in the next few days.
The additional Hardest Hit Funds will be available to the following
states; the proposed allocation is based on the state's size as measured by
population.
"We remain committed to helping struggling homeowners, and this program
will provide additional assistance to states hit hardest by unemployment," said
Assistant Secretary for Financial Stability Herb Allison. "This is part of the
Administration's comprehensive housing policy that has helped to stabilize a
fragile housing market and allows responsible homeowners the chance to reduce
their monthly mortgage payments to affordable levels."
"HUD's new Emergency
Homeowner Loan Program will build on Treasury's Hardest Hit initiative by
targeting assistance to struggling unemployed homeowners in other hard hit
areas to help them avoid preventable foreclosures," said Bill Apgar, HUD Senior
Advisor for Mortgage Finance. "Together, these initiatives represent a combined
$3 billion investment that will ultimately impact a broad group of struggling
borrowers across the country and in doing so further contribute to the
Administration's efforts to stabilize housing markets and communities
MORE FROM THE NATIONAL COUNCIL OF STATE HOUSING FINANCE AGENCIES