$1 billion in new help to flailing homeowners

Only about 30,000 are expected to get these interest-free loans, which can eventually be forgiven by the Emergency Homeowners' Loan Program.

By MSN Money Partner Jun 22, 2011 1:36PM

This post comes from Marilyn Lewis at MSN Money.

 

The word (OK, two words) for today is: Get moving.

 

Homeowners have until July 22 to get pre-screened for a new, interest-free government loan intended to help delinquent homeowners stave off foreclosure. In fact, for those who play by the rules, the loan isn't really a loan -- it's a gift.

 

No reason is offered for the short deadline, only that the next four weeks are for "pre-screening" applicants. After that, presumably, selected homeowners will be allowed to apply.

 

The $1 billion in aid -- money provided in the Dodd-Frank Wall Street Reform and Consumer Protection Act (.pdf file) -- was announced this week.

 

"The program, known as the Emergency Homeowners' Loan Program, is expected to help up to 30,000 distressed borrowers, according to HUD," says The Washington Post.

 

That's about $34,000 apiece, on average. Sounds great, but of course there are plenty of caveats and qualifications.

 

Who's eligible?

Apply if:

  • You're (involuntarily) unemployed or underemployed after losing a job or because of a serious medical condition.
  • You're at least 90 days delinquent on your mortgage payments on your primary home.
  • You've received a notice of foreclosure.
  • Your income has dropped by at least 15%.
  • You're likely to be able to resume home payments within two years.
  • You meet the income eligibility criteria. Roughly, that's if your household income in 2009 was at or below $75,000 a year or 120% of the area median income for a household size of four.

These loans can become gifts

These "bridge loans" of up to $50,000 are "forgivable," says HUD. They appear to be carefully constructed to reduce the incentive for underwater homeowners to walk away from their homes.

 

Here's how the program works:

  • Lucky approved homeowners will get one-time help to become current on overdue mortgage costs and make monthly (first lien) mortgage payments (including principal, interest, taxes, and insurance) for a maximum of two years or $50,000.
  • The loan becomes a junior lien against the borrower's home. No payments on the loan are due for five years if the borrower stays current on mortgage payments and meets other requirements. After that, the loan balance is reduced by 20% a year until nothing is owed and the junior lien is eliminated.

The loans are available only in 32 states and Puerto Rico. Participating states: Alaska, Arkansas, Colorado, Connecticut, Delaware, Hawaii, Idaho, Iowa, Kansas, Louisiana, Maine, Maryland, Massachusetts, Minnesota, Missouri, Montana, Nebraska, New Hampshire, New Mexico, New York, North Dakota, Oklahoma, Pennsylvania, South Dakota, Texas, Utah, Vermont, Virginia, Washington, West Virginia, Wisconsin and Wyoming.

 

Tips:

Watch for fraud

Beware of fraudsters, who are bound to crop up like toadstools after a rain. ConsumerAffairs.com says that legitimate agencies won't phone you. You'll have to call them.

 

The rules require that you personally apply for the loan. In other words, if someone calls you, asks for advance payment and promises to apply on your behalf, you've hooked a con artist and you'd be a dope to participate.

 

On the other hand, ConsumerAffairs says, the actual, legitimate government program itself can sound a little fishy:

It may sound like a classic foreclosure rescue scam: a limited-time offer for a free government loan to save your home. But this time the offer is legitimate.

The rest of the states

You may be wondering: Why only some states?

 

The answer: Homeowners in the other states already are getting billions of dollars in help from the Hardest Hit FundPost continues after this video about Florida's Hardest Hit Fund.

Starting on Feb. 19, 2010, with $1.5 billion, that fund helps distressed homeowners in states with unusually high unemployment rates or home-price drops of more than 20%. Several more infusions of cash have plumped up the fund, for a total by last November of $7.6 billion.

 

These "hardest-hit" states are: Alabama, Arizona, California, Florida, Georgia, Illinois, Indiana, Kentucky, Michigan, Mississippi, Nevada, New Jersey, North Carolina, Ohio, Oregon, Rhode Island, South Carolina, Tennessee and Washington, D.C.

 

The Hardest Hit program has been useful for some homeowners -- here's the story of one Tennessee woman for whom it was a lifeline. Others find they're too far behind on their mortgage payments to qualify for help. (Hardest-Hit program rules and available money vary by state. Here's where to find the details for your state.)

 

More on MSN Money:

VIDEO ON MSN MONEY

208Comments
Jun 23, 2011 8:26AM
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So, if the borrower finally does default anyway in 2 years and the bank/lender eventually does foreclose, $50,000 which would have most likely been a loss for the bank will now be a loss for the government instead, i.e. ,all of us. Privatize the profits and socialize the losses. It’s just another bailout for the banks in a different disguise, this time scheduled in advance so the banks will have time to make appropriate plans. All this is doing is prolonging the horror story that our residential real estate market has become, mostly for those who had nothing to do with the cause.  If it’s such a great idea for saving these borrowers and the housing market, why not require the banks, which largely caused the mess in the first place, to fund it.

Jun 23, 2011 9:29AM
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Another program for people that have defaulted on their loans and can't pay for their mortgage, why?  What about those of us that are current on their loans but now have no equity to refinance the first and second mortgage due to the market?  When my husband's job in construction played out because of the market we took a big hit and he took a job making half the income.  We've learned to live without, but it would be nice if we could refinance the debt since the income is half what it was before the market dropped.

Jun 22, 2011 5:46PM
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Free money, from the federal Govt. for a lot of irresponsible people, is something, I do not approve of. But on the other hand, we bailed out the banks, so that the top banking people that got us into the financial crisis, can once again get million dollar bonuses. We are also spendiing billions in foreign aide which I do not agree with either. Not much can be done, with the corrupt Govt. we have, both parties, are guilty. 
Jun 23, 2011 7:57AM
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How is this 'doomed to fail'?  The 'plan' is to give EVEN MORE of our tax money to people that aren't working.  Based on what I've seen, the government (and especially this current one) is very good at doing that!  In fact, I expect this plan to throw more of my tax money away to be so successful that they increase the amount they waste before it's over!
Jun 23, 2011 10:16AM
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My tax dollars should not be spent on those financially inept and over extended.  My tax dollars are not a charitable expense, but supposedly the means to run our government.  If the government stuck to the constitution and used our tax dollars as prescribed, our country would not be in the financial mess it finds itself in today.  If someone wasn't fiscally bright enough to put money in savings for the proverbial "rainy day" then it's their problem, not the taxpayers.
Jun 23, 2011 11:54AM
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Time after time, the government bails someone out that bought something they could not afford or should not have.  I empathize they may have lost their jobs and now can not afford the homes.  Until the federal government let's the foreclosures hit bottom, it will prolong the agony for years.  If they can not afford it now, they will not be able to afford their homes.  I am a middle class citizen and I am thoroughly sick of the federal government continually reward others for wrongdoing and do nothing for people like me that have paid their mortgages on time and did not buy something I could not afford.  I am tired of paying for other families and their kids to go to college for free or with subsidized loans and my kids have to pay every dime out our their adn my pocket to go to college, and the federal government taking my tax money so I can pay for other kids to go to college for free.  i can not believe others are not upset.
Jun 23, 2011 11:03AM
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Why do I even bother paying my bills on time?!  Why is it that when you try and do everything right, or the way it's supposed to be done, that you only end up with a boot in your back side.  Sorry to those out there that may have lost their job and are unable to pay their bills because of that, but I'm tired of this country picking up the slack for the people that over extended themselvs, and are putting me behind because of it. The people that keep this country running by paying their bills and their taxes never get a leg up.
Jun 23, 2011 2:04PM
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I hear stories everyday of business owners trying to give people jobs.  They're shocked how many unemployed don't want to work but would rather stay on welfare.  How on earth do you get people working again when you constantly reward them for being lazy.   I pay my mortgage on time, feed my family without food stamps and still get up everyday and work harder for less pay than I did a few years ago.  Where's my reward?  Shouldn't I, and others who work hard, get something, too? How come nobody offers to pay my mortgage.
Jun 23, 2011 12:05PM
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Taking money from the good tax payers and give it to the losers. Keep helping the dead beats that over extended themselves and just had to have the bigger house and all the toys. Screw them and the government for helping them!!!!
Jun 23, 2011 1:08PM
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What about the one's struggling to stay current and ontime....no relief for these folks....just wondering.
Jun 23, 2011 11:32AM
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Democracy is failing. Dems hand out $$$ to low-life's who make bad choices and Reps hand out $$$ to corporate firms and farmers...it's called buying votes and the voters go out and vote themselves a pay raise. This all wont be so funny when we lose our standard of living, which is already happening. The govt does nothing well, and yet we keep letting them get more and more involved with every aspect of our lives. When are people going to wake up and take THEIR country back?? I keep seeing people blame banks for this mess. It was the govt that was responsible for this mess first and foremost. They were the ones who MANDATED that banks lend to less than credit worthy customers, it was the govt that created the Community Re-Investment Act that started all of these less than 20% down payment crap. It was the govt that stood by and watch all of this go down and did nothing even when the Fed Chair (Greenspan) warned them.  
Jun 23, 2011 1:28PM
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Gee nobody bailed out my husband and I when we both lost our jobs.  My job abolished. His plant closed down in 1998.  We struggled got worked out deals with our creditors etc.  We ended up with really crappy credit rating and are just getting back on track.  People who do what they're supposed to do get no help.  I pay 9.5% interest on the home loan.  Almost got stung trying to refi once and gave up.  Things looked crooked.  Never any help for us.  Guess we should all just stop paying our bills and stick our hands out.  Like I said I know some really need it but others really know how to use the system and the system STINKS!
Jun 23, 2011 10:25AM
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Dodd-Frank: Democrats buying votes 30,00 at a time using money confiscated from tax paying citizens.  From each according to their ability, to each according to their need - socialism at its worst.  
Jun 23, 2011 10:59AM
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wtf...where is money for people who pay their bills on time and have never defaulted on anything?
Jun 23, 2011 10:23AM
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Merry Christmas to some, and to most others "here's the bill."  What is next Student Loans?  Also, our Government has become a group of Pan Handlers who refuse to work out the real problems because the Tax Payers keep electing these bums!
Jun 23, 2011 10:32AM
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Great more free handouts, I wonder how many people will intentionally go delinquent to get the free money. Looks like we will all be paying higher taxes this year. Lets reward the people that got into a house they couldn't afford and let everyone else pay the price. Might as well we are paying for the banks and the government that couldn't manage their money as well. 
Jun 23, 2011 1:55PM
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These were YOUR decisions to buy more than your could afford, YOUR decision to have kids you can't afford, YOUR decision to choose a career path that doesn't support you, and YOUR decision to NOT purchase mortgage insurance. Stop expecting responsible society to bail your irresponsible **** out at every turn
Jun 23, 2011 12:25PM
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Lets see.  Buy more than you can afford.  Get a loan that is adjustable.  Why are we paying for your mistakes?  What ever happened to personal responsibility?  There is only about 1% of people losing their homes that truely need help.  The other people are just imcompetent and need to have their credit destroyed for buying too much!!!!
Jun 23, 2011 12:31PM
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Yet another reason to vote for Ron Paul, he would never allow Gov't to take money from  financially responsible tax payers and give it to the losers.
Why should people who save and live responsibly have to pay the debts of the ones who want to live a life they cant afford.
Jun 23, 2011 12:10PM
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i can't believe this crap. another reason to ignore personal debt. i could see a low or even no interest short term loan to help but to have the debt forgiven is totally absurd. the obvious question is...where is this money coming from?  i would bet it is another bailout that rests directly with the taxpayers.
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