My Real Estate Blog

More qualified homeowners struggling with unemployment or under-employment in additional states have been targeted by two expanded foreclosure-prevention efforts from the Obama administration.

From the U.S. Department of the Treasury's Housing Finance Agency Innovation Fund for the Hardest Hit Housing Markets, comes $2 billion in additional assistance available for HFA programs for homeowners struggling to make their mortgage payments due to unemployment.

Earlier this year the Hardest Hit Fund launched with $1.5 billion going to only five states Arizona, California, Florida, Michigan and Nevada, where home values have fallen more than 20% from peak 2006 and 2007 markets. The money was earmarked for state housing agency programs that reduce so-called "preventable" foreclosures faced by unemployed home owners, so-called "underwater" home owners and home owners struggling with second mortgages.

The extra $2 billion is earmarked for states that have experienced an unemployment rate at or above the national average over the past 12 months -- Alabama, California, Florida, Georgia, Illinois, Indiana, Kentucky, Michigan, Mississippi, Nevada, New Jersey, North Carolina, Ohio, Oregon, Rhode Island, South Carolina, Tennessee and Washington, D.C.

Each state must submit for approval, proposals 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. The original states can add the new money to previously approved programs or design new ones.   

Building on the Hardest Hit Fund, the U.S. Department of Housing and Urban Development will soon launch, for the same 17 states and the District of Columbia, a $1 billion Emergency Homeowners Loan Program specifically for emergency zero-interest "bridge" loans to help struggling homeowners make house payments for up to two years.

The loans are earmarked for qualified homeowners who are at risk of foreclosure and have experienced a substantial reduction in income due to involuntary unemployment, underemployment, or a medical condition.

Administered by state and non-profit entities, the emergency loan program will offer declining balance, deferred payment loans for up to $50,000 to assist eligible borrowers in making house payments, including property taxes and homeowners insurance for up to 24 months. The loans will be non-recourse, zero-interest, subordinate loans, that help borrowers "bridge" their financial troubles until they find work.

Eligibility requirements will include:
 
• The borrower must be at least three months behind on his payment but have a "reasonable likelihood" of resuming his regular monthly payments and related housing expenses within two years.

• The borrower must demonstrate a good payment record prior to the event that caused the reduced income.

• The property must be the borrower's primary residence. Vacation homes and investment properties don't qualify.

HUD promised more details in the coming weeks when the programs roll out.