$3 billion additional assistance for jobless homeowners

August 17, 2010

On August 11, 2010, the Obama Administration announced additional support to help homeowners struggling with unemployment through two targeted foreclosure-prevention programs.

Through the existing Housing Finance Agency (HFA) Innovation Fund for the Hardest Hit Housing Markets (HFA Hardest Hit Fund), the U.S. Department of the Treasury will make $2 billion of additional assistance available for HFA programs for homeowners struggling to make their mortgage payments due to unemployment. Additionally, the U.S. Department of Housing and Urban Development (HUD) will soon launch a complementary $1 billion Emergency Homeowners Loan Program to provide assistance – for up to 24 months – to homeowners who are at risk of foreclosure and have experienced a substantial reduction in income due to involuntary unemployment, underemployment, or a medical condition.

“HUD’s new Emergency Homeowner Loan Program will build on Treasury’s Hardest Hit initiative by targeting assistance to struggling unemployed homeowners in other hard hit areas to help them avoid preventable foreclosures,” said Bill Apgar, HUD Senior Advisor for Mortgage Finance. Together, these initiatives represent a combined $3 billion investment that will ultimately impact a broad group of struggling borrowers across the country and in doing so further contribute to the Administration’s efforts to stabilize housing markets and communities across the country.”

Hardest Hit Fund

President Obama first announced the HFA Hardest Hit Fund in February 2010 to allow states hit hard by the economic downturn flexibility in determining how to design and implement programs to meet the local challenges homeowners in their state are facing.

Under the additional assistance announced, states eligible to receive support have all experienced an unemployment rate at or above the national average over the past 12 months. Each state will use the funds 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.

States that have already benefited from previously announced assistance under the HFA Hardest Hit Fund may use these additional resources to support the unemployment programs previously approved by Treasury or they may opt to implement a new unemployment program. States that do not currently have HFA Hardest Hit Fund unemployment programs must submit proposals to Treasury by September 1, 2010 that, within established guidelines, meet the distinct needs of their state.

The states eligible to receive funds through this additional assistance, along with allocations based on their population sizes, are as follows:

Alabama $60,672,471
California $476,257,070
Florida $238,864,755
Georgia $126,650,987
Illinois $166,352,726
Indiana $82,762,859
Kentucky $55,588,050
Michigan $128,461,559
Mississippi $38,036,950
Nevada $34,056,581
New Jersey $112,200,638
North Carolina $120,874,221
Ohio $148,728,864
Oregon $49,294,215
Rhode Island $13,570,770
South Carolina $58,772,347
Tennessee $81,128,260
Washington, DC $7,726,678

HUD Emergency Homeowners Loan Program

This new program will complement Treasury’s HFA Hardest Hit Fund by providing assistance to homeowners in hard hit local areas that may not be included in the hardest hit target states. Those areas are still being determined.

The program will work through a variety of state and non-profit entities and will offer:

  • a declining balance
  • deferred payment “bridge loan” (0% interest, non-recourse, subordinate loan) for up to $50,000 on their mortgage principal, interest, mortgage insurance, taxes and hazard insurance for up to 24 months.

Under the program, eligible borrowers must:

  • Be at least 3 months delinquent in their payments and have a reasonable likelihood of being able to resume repayment of their mortgage payments and related housing expenses within 2 years;
  • Have a mortgage property that is the principal residence of the borrower, and eligible borrowers may not own a second home;
  • Demonstrate a good payment record prior to the event that produced the reduction of income.

HUD will announce additional details, including the targeted communities and other program specifics when the program is officially launched in the coming weeks.


Credit After a Short Sale vs. Foreclosure

December 7, 2009

 

One of the most commonly asked questions about a short sale is how it will impact credit and the ability to purchase a home in the future. Whether you are a buyer, seller or investor, it’s imperative to educate yourself on this all important aspect of credit to become fully informed before making a final decision or in order to assist sellers in determining the right course of action for their financial future.

Here to help sort through the confusion is a quick primer on credit after a short sale vs. foreclosure. Remember, every situation is distinctive so these estimates represent the average experience of most individuals.

Note: Depending on the situation, circumstances may vary.

Average Time to Rebuild Credit to Purchase a Home

  • After a foreclosure: 5 – 7 years
  • After a foreclosure with extenuating circumstances such as, but not limited to: disability, death of a spouse, etc: 3 – 7 years
  • After a Deed in Lieu (DIL) of foreclosure: 4 – 7 years
  • After a Short Sale: 0 – 2 years

Other Alternatives

The above averages represent typical buying patterns for those using regular lenders to obtain a conventional loan or government backed loans; private investors are still viable options that enable many people to purchase another home immediately after any type of financial fiasco, including foreclosure. However, mortgage rates tend to be less favorable and requirements more stringent than ever. Just a few years ago it was quite easy to obtain a sub-prime mortgage for a relatively low rate above the preferred status, but today, much of that has changed. While it is still possible to obtain the equivalent of a sub-prime mortgage, be prepared to come up with a much larger down payment and higher overall rates.

Short Sales Win Hands Down

Sellers wishing to minimize damage to their financial future clearly come out ahead when using a short sale but it’s still possible to further decrease the downside by avoiding a 60-day late payment, working closely with the lender to achieve a quick price agreement, and setting aside as much funds as possible for a new loan. In fact, homeowners that maintain a solid payment history and work-out an agreeable short sale deal early may find it desirable to downsize to a new home by setting aside additional funds equal to 20% down. With Private Mortgage Insurance (PMI) and a reduced debt-to-income (DTI) ratio, sellers are finding it possible to take advantage of lowered property values to immediately purchase another home for a fraction of the cost (and debt burden). 

Conclusion: It’s a win-win for all involved but, only if you understand the benefits and work aggressively to seal the deal.

*This post has been adapted from Real Estate News & Commentary by Chris McLaughlin


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