$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.
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.
- 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
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.
- You can fill out the pre-screening questionnaire beginning in the middle of this page.
- Look here to find eligibility requirements and application details for most states.
- Check here for help in Connecticut, Delaware, Idaho, Maryland and Pennsylvania.
- Here's a checklist of documents (.pdf file) you'll need to apply.
- To get help applying from an agency or counselor, go to the bottom of this page and choose a participating state. (It won't work if you select a state that's not in the list above).
- Call toll-free (855) 346-3345 or email firstname.lastname@example.org with questions.
- Or get help from a HUD-approved housing counseling agency.
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 Fund. Post 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
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.
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.
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