Another $2 billion in federal funds is being handed out so that states can help unemployed borrowers avoid foreclosure. In addition, a second foreclosure prevention program was unveiled today.
The Housing Finance Agency Innovation Fund for the Hardest Hit Housing Markets was established in February. The fund is designed as a flexible way to enable states that were hit hard by the economic downturn to develop, design and implement local programs for homeowners.
In June, the administration announced that $1.5 billion was being provided to Arizona, California, Florida, Michigan and Nevada. A week ago, five more states — Ohio, Oregon, North Carolina, Rhode Island and South Carolina — were given $0.6 billion to help an estimated 50,000 borrowers.
Today, the administration announced that $2 billion would go to 17 states and the District of Columbia. The funds are being used to assist unemployed borrowers.
The latest round of states includes Alabama, California, , Georgia, Illinois, Indiana , Kentucky, Michigan, Mississippi, Nevada, New Jersey, North Carolina, Oregon, Rhode Island, South Carolina and Tennessee.
Eligible states — including those that have already received funding — are those that have had a worse unemployment rate than the national average during the past year. The funds will be targeted for unemployment programs that provide temporary payment assistance to eligible borrowers as they seek re-employment, additional employment or undertake job training.
HUD also announced the Emergency Homeowners Loan Program. The program, which compliments the state programs, provides up to 24 months’ assistance to borrowers at risk of foreclosure who experienced a substantial reduction in income as a result of involuntary unemployment, underemployment or a medical condition.
Designed to assist borrowers who are not located in hard-hit areas, the program will provide a declining balance, deferred payment bridge loan with an 0.00 percent rate. The non-recourse, subordinate loan can be as high as $50,000. It can be used to assist eligible borrowers with payments on their housing payments for up to two years.
Eligible borrowers must be at least three months delinquent, have a good payment history prior to the event that made them delinquent and be likely to be able to resume their payments within two years. The property must be owner-occupied, and the borrower cannot own a second home.
More details about the $1 billion Emergency Homeowners program will be released in coming weeks.
“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,” U.S. Department of the Treasury Assistant Secretary for Financial Stability Herb Allison said in the statement. Allison was the president and chief executive officer of Fannie Mae before his confirmation by the U.S. Senate in June 2009.
