Industry News, Mortgage, Story

5 states get $600M for foreclosure prevention

Latest allocation goes to Carolinas, Ohio, Oregon, Rhode Island

Editor’s note: This story has been corrected. A previous reference to this being the "final round" of Hardest Hit funding has been deleted.

The Obama administration has released $600 million in TARP funds that are intended to help state Housing Finance Agencies assist an estimated 50,000 homeowners facing foreclosure in five states hit hard by unemployment.

The Treasury Department announced today that it had approved plans submitted by HFAs in North Carolina, Ohio, Oregon, Rhode Island and South Carolina to allocate $600 million from the $2.1 billion "Hardest Hit Fund."

The money will be used to support local initiatives ranging from assistance for unemployed homeowners to help them make their mortgage payments, to incentives for lenders to sign off on loan modifications and short sales.

The Treasury on June 23 approved applications for $1.5 billion in funding from five states with high foreclosure rates — Arizona, California, Florida, Michigan and Nevada. The program, which was announced in February, is funded by the Troubled Asset Relief Program (TARP).

Homeowners seeking assistance in the 10 states receiving Hardest Hit Fund allocations must apply through their HFA. The Treasury said HFAs in the five latest states approved for funding haven’t yet begun accepting applications.

The Treasury has published proposals from all HFAs receiving funding detailing the programs and services they will provide. In the latest round of funding:

North Carolina will receive $159 million to implement a plan designed at helping an estimated 7,190 homeowners by:

  • Providing assistance to unemployed homeowners who are in danger of losing their homes to foreclosure.
  • Refinancing existing second mortgages in partnership with the current lender in order to make the mortgage payments more affordable.
  • Providing principal reductions of first mortgage along with possible rate reduction and term extension by the current lender.

Ohio has been approved for $172 million for a proposal aimed at helping up to 15,356 homeowners by: 

  • Providing assistance to bring delinquent mortgage payments current for homeowners who have suffered a loss of income or other unforeseen circumstances.
  • Helping unemployed borrowers pay their mortgage for up to 12 months while they search for a new job or participate in a job training program.
  • Setting up a loan modification program to incentivize lenders and servicers to reduce a homeowner’s mortgage principal balance to 115 percent or less of loan-to-value ratio, increasing eligibility for HAMP or other modification programs.
  • Facilitating short sales or deeds-in-lieu of foreclosure by providing incentive payments to loan servicers, relocation aid to the borrower, and payments in exchange for the release of second liens.

Oregon is slated to receive $88 million to execute a plan aimed at helping as many as 7,400 homeowners by:

  • Providing funds to assist with loan modifications, including through principal reduction and arrearage payments.
  • Providing up to six months of mortgage payment assistance for unemployed borrowers when lenders agree to provide matching assistance for up to six additional months.
  • Funding for to pay arrearages or other fees incurred during unemployment or financial distress once a homeowner has regained employment or recovered from that financial distress.
  • Assisting program borrowers who are ultimately unable to find a job to facilitate a short sale or deed-in-lieu of foreclosure. Assistance would be matched by lenders or servicers.

Rhode Island will receive $43 million to implement a plan that’s intended to help up to 5,000 homeowners by:

  • Providing assistance to eligible homeowners who otherwise would not qualify for the federal Home Affordable Modification Program (HAMP).
  • Offering assistance to eligible homeowners who have mortgages with lenders or servicers who do not participate in HAMP. Proceeds will be used to assist the borrower and lender to achieve a loan modification.
  • Providing mortgage payment assistance to homeowners who are at risk of foreclosure due to temporary financial crisis caused by an uncontrollable increase in expenses or an uncontrollable decrease in income.
  • Providing payments to lien holders to facilitate a short sale or deed-in-lieu of foreclosure and assist with relocation expenses for homeowners who have suffered a financial crisis and are no longer able to stay in their home.

South Carolina is slated to get $138 million to carry out a proposal aimed at helping up to 12,000 homeowners by:

  • Assisting homeowners experiencing unemployment or short-term loss of income by making all or part of their mortgage payment for a period so that they can stay current on their mortgage.
  • Offering assistance to borrowers who have experienced a hardship but have regained the ability to pay. Funds can be used to pay arrearages, late charges, and reduce principal.
  • Providing funds to servicers to assist in making borrowers HAMP-eligible.
  • Providing funds to modify second liens in order to allow the modification of the first lien.
  • Providing funds to encourage lien holders to sign off on short sales or deeds-in-lieu of foreclosure, and subsidize borrower relocation costs.

 


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