$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.

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Home Affordable Unemployment Program (UP)

July 6, 2010

 

The Home Affordable Unemployment Program (UP) is a supplemental program to the Home Affordable Modification Program (HAMP) which provides assistance to unemployed borrowers. The Unemployment Program grants qualified unemployed borrowers a forbearance period which reduces or suspends their monthly mortgage payment.

***Note:  UP is for first lien mortgage loans that are not owned or guaranteed by Fannie Mae or Freddie Mac (Non Government-Sponsored Enterprises (GSE) Mortgages) or insured or guaranteed by a federal agency, such as the Federal Housing Administration (FHA).***

The program is effective for participating HAMP servicers on July 1, 2010; however, servicers may begin to offer UP earlier.

Eligibility

Servicers are required to offer UP when the following criteria is met:

  • Loan is a first lien mortgage, originated on or before January 1, 2009, secured by a one- to four unit property, 1-unit of which is the borrower’s principal residence and the unpaid principal balance (UPB) is equal to or less than $729,750 on 1-unit properties (See Supplemental Directive 09-01 for amounts on 2 – 4 unit dwellings)
  • Loan has not been previously modified under HAMP and the borrower has not previously received a UP forbearance period
  • Borrower is unemployed at the date of the request for UP and is able to document that they will receive unemployment benefits or have been receiving unemployment benefits at commencement of the forbearance plan
  • Servicers have the discretion whether or not to require a borrower to have received unemployment benefits for up to 3 months before commencement of the forbearance plan
  • Borrower is either delinquent but has not missed more than 3 consecutive monthly payments or default is reasonably foreseeable

It is at the servicer’s discretion whether to offer UP if a borrower’s total monthly mortgage payment is less than 31% of the borrower’s monthly gross income.

Additional UP forbearance plan eligibility requirements include that the borrower:

  • Makes a request before the first mortgage lien is seriously delinquent (before 3 monthly payments are due and unpaid). A request for UP may be made by phone, mail or email. Within 10 business days, servicers must confirm the receipt of the request with the borrower via mail or return email.
  • Is unemployed at the date of the request for UP and is able to document that he or she will receive unemployment benefits in the month of the Forbearance Period Effective Date even if his or her unemployment benefit eligibility is scheduled to expire before the end of the UP forbearance period.

Terms

The UP forbearance period is 3 months or upon notification that the borrower has become re-employed; however, it can be extended in accordance with investor and regulatory guidelines.

The monthly payment MUST be reduced to 31% (or less) of the borrower’s gross monthly income. At the discretion of the servicer, monthly mortgage payments may be suspended in full.

Payment amount and due date, if any, is established by the servicer according to investor and regulatory guidelines.

Servicers are prohibited from:

  • Initiating foreclosure action or conducting a foreclosure sale while the borrower is being evaluated for UP
  • After the Foreclosure Plan Notice (FPN) is mailed
  • During the UP forbearance or extension while the borrower is being evaluated for or participating in HAMP or HAFA following, the UP forbearance period

A borrower in a permanent HAMP modification that becomes unemployed is not eligible for an UP forbearance plan.

A borrower who was previously determined to be ineligible for a HAMP modification may request consideration for an UP forbearance plan if the borrower meets all of the eligibility requirements.

If the servicer is requiring a reduced monthly payment, the borrower’s reduced payment MUST be received by the servicer on or before the last day of the month in which it is due.

If the borrower fails to make timely payments, the UP forbearance plan may be canceled and the borrower is not eligible for HAMP consideration.

Reporting Requirements

To Credit Bureaus:

The servicer should continue to report a “full-file” credit report to each major credit repository.


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