The first states to receive funds under the Administration's "HFA Hardest Hit Fund" have been announced by the Treasury Department.
Arizona, California, Florida, Michigan, and Nevada will be the first to receive funding for local initiatives to assist struggling homeowners.
The Hardest Hit program was first announced by President Obama in February under the title of 4HM or Help for the Hardest-Hit Housing Market. The program allocates 1.5 billion in funds set aside for housing under the Emergency Economic Stabilization Act (EESA) of 2008. Funds are available for states where the average home price has fallen more than 20 percent from the peak and where high unemployment (later defined as over 12 percent) is also an issue.
In order to participate in the program, states had to submit program plans to the Treasury Department by last April 16 for review of compliance with EESA program guidelines. In March Treasury announced an expansion of the program to include North Carolina, Ohio, Oregon, Rhode Island, and South Carolina and a second round of funding in the amount of $600 million.
The allocations announced today are for Housing Finance Agencies (HFAs) in the five original target states which submitted proposals for various programs to assist struggling homeowners. HFAs are authorities or agencies created under state laws to help persons and families of low or moderate income attain affordable housing.
Under the guidelines for the Hardest Hit program, funds can be used to reduce negative home owner equity through principal reduction, assist the unemployed and underemployed to make mortgage payments, facilitate the settlement of junior liens in order to complete short sales and/or deeds in lieu of foreclosure, and assist in the payment of arrearages.
Below is a breakdown of each state's strategy...
Arizona ($125.1 million)
- Arizona will provide assistance in the form of principal reduction, interest rate reduction, and/or term extension programs with the goal of allowing borrowers to enter into a permanent modification program.
- In circumstances where a second lien is prohibiting modification of a first lien, the state will provide assistance toward elimination of the second lien.
- The state will also offer assistance to the under-employed while they seek new employment. This assistance may be used to pay monthly mortgage payments or remove second mortgages where that second lien is prohibiting the modification of a first lien.
HERE is Arizona's proposal
California ($699.6 million)
- California will provide assistance to reduce principal with earned principal forgiveness.
- The state will also target funds to address delinquent loan arrearages.
- California will offer a mortgage payment subsidy to unemployed families.
- Provide funds to assist families that have executed a short sale or deed-in-lieu of foreclosure transition to a stable housing situation.
HERE is California's proposal
Florida ($418 million)
- Florida will offer mortgage payment assistance to the unemployed and under-employed while they seek re-employment.
- Florida will offer up mortgage payment assistance to the unemployed and under-employed while they seek re-employment. The state will also offer principal reduction or s
- econd lien extinguishment if necessary to achieve a mortgage modification.
HERE is Florida's proposal
Michigan ($154.5 million)
- Michigan will subsidize an unemployed borrower's mortgage payments while they search for employment.
- The state will assist with loan arrearages for those who can sustain homeownership and have undergone a financial hardship.
- The state will assist homeowners with negative equity through earned principal forgiveness.
HERE is Michigan's proposal
Nevada ($102.8 million)
- Nevada will create a mortgage modification program using a combination of forgiveness and forbearance with a goal of reducing principal to less than 115 percent of LTV (loan-to-value) and lowering payments to 31 percent of DTI (debt-to-income).
- The state will also offer assistance to reduce/eliminate second liens with earned forgiveness over a three-year term.
- Additionally, the state will provide allowances for appraisal and transaction fees, moving fees, a legal allowance for up to three months, and a combination of incentives for borrowers and servicers to facilitate short sales.
HERE is Nevada's proposal
In announcing the awards, Treasury Assistant Secretary for Financial Stability Herbert M. Allison, Jr. said, "These states have identified a number of innovative programs that will make a real difference in the lives of many homeowners facing foreclosure."