Bank reform brings mortgage aid for the unemployed
Amy Hoak from Market Watch reports on a new program that is designed to help the unemployed avoid foreclosure. $1B has been earmarked to help homeowners make payments after they have lost their jobs. Ms. Hoak reports, “The loss or reduction of income was the primary reason that 58% of homeowners in the National Foreclosure Mitigation Counseling program were facing foreclosure, according to a recent NeighborWorks report.”
“In this economy, getting that next job hasn’t been a very quick thing,” said Julia Gordon, senior policy counsel for the Center for Responsible Lending. For many, a three-month forbearance period isn’t enough, she said.
“For the most part, these are people whose loans are sound, 30-year fixed-rate loans. The person is in a bad situation because they’re underwater in terms of equity and they can’t make payments. They can’t borrow against their house and in many cases can’t sell their house,” Gordon said of the new group of homeowners who could be helped. “We don’t know how many people are paid for with a billion dollars, but it is a great start.”
Bank reform brings mortgage aid for the unemployed
New law includes funds for foreclosure prevention, rehab of abandoned homes
CHICAGO (MarketWatch) — More help is on the way for unemployed homeowners struggling to make their mortgage payments, thanks to funding tucked into the financial reform legislation signed by President Obama on Wednesday.
Although the U.S. Department of Housing and Urban Development hasn’t released the details of exactly how the $1 billion emergency homeowners’ relief fund will be distributed, legislation dictates that the program start by Oct. 1.
HUD is reviewing the language to determine the best method of implementation, said Lemar C. Wooley, a HUD spokesman.
The bill also includes $1 billion for redevelopment of abandoned and foreclosed homes.
The relief-fund program is similar to a Pennsylvania program that provides financial assistance to out-of-work homeowners so they can keep up with their housing costs, said John Dodds, director of the Philadelphia Unemployment Project. The money has been available to residents since the 1983 recession, he said.
Dodds lobbied for the national funding, and said it’s necessary to address what is probably the biggest reason for foreclosure today: the loss of income.
The loss or reduction of income was the primary reason that 58% of homeowners in the National Foreclosure Mitigation Counseling program were facing foreclosure, according to a recent NeighborWorks report. NeighborWorks is a national nonprofit organization created by Congress to provide financial support, technical assistance and training for community-based revitalization efforts. It also serves as administrator of the NFMC program.
“The Home Affordable Modification Program was designed to work for the subprime problem. It was really never designed for the unemployed,” Dodds said. Under HAMP, mortgages are modified so that monthly payments are affordable. For those with no income, however, options are limited.
Currently, unemployed homeowners are granted at least three months’ forbearance on their mortgage loans through the Home Affordable Unemployment Program. Some states hardest hit by the foreclosure crisis received extra federal funds for foreclosure prevention, and some states offer assistance for unemployed homeowners.
But the new funding in the bank-reform bill extends help for unemployed homeowners to all parts of the country.
“In this economy, getting that next job hasn’t been a very quick thing,” said Julia Gordon, senior policy counsel for the Center for Responsible Lending. For many, a three-month forbearance period isn’t enough, she said.
“For the most part, these are people whose loans are sound, 30-year fixed-rate loans. The person is in a bad situation because they’re underwater in terms of equity and they can’t make payments. They can’t borrow against their house and in many cases can’t sell their house,” Gordon said of the new group of homeowners who could be helped. “We don’t know how many people are paid for with a billion dollars, but it is a great start.”
Update on home-loan modifications
The Obama Administration’s latest housing scorecard revealed some progress with the government’s modification program in June. More than 51,000 trial modifications became permanent last month, raising the number of permanent modifications through HAMP to a total 398,000.
Participating borrowers are required to go through a trial period before the modification becomes permanent. But cancellations of those trials remain high as many borrowers aren’t able to meet eligibility requirements, including verifying income or successfully making all trial payments, according to the report.
Despite recent progress, some are critical of HAMP, saying it hasn’t done enough to combat the nation’s foreclosure problem.
HAMP “established some standardization for loan modification across the industry,” Gordon said. “What it hasn’t managed to do is produce the volume of loan modifications that is enough to make a difference in the overall economic impact of the foreclosure crisis … let alone the lives of the people who are impacted.”
Neighborhood funds
The bank-reform bill’s money for the Neighborhood Stabilization Program brings total funding of the NSP to $7 billion, according to a news release from the National Foreclosure Prevention and Neighborhood Stabilization Task Force, a group of local and national organizations working to address the impact of the foreclosure crisis on communities. The task force is led by the National Housing Conference, Enterprise Community Partners and NeighborWorks America.
The NSP funds are used for purposes including the purchase and rehabilitation of abandoned or foreclosed homes, establishing financing tools for the purchase and redevelopment of foreclosed homes and the demolition of blighted structures.
“Given the magnitude of the foreclosure crisis, these additional funds are desperately needed,” said Democratic Rep. Maxine Waters of California, chairwoman of the House Financial Services Housing and Community Opportunity Subcommittee, in the news release. “The additional NSP funds will help address the enormous supply of foreclosed properties plaguing nearly every corner of our country.”
Since April 2009, 21,148 housing units have been constructed or rehabilitated and 11,814 units have been demolished or cleared using NSP funds, according to the Obama Administration’s latest housing scorecard.