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Obama Administration Approves State Plans for Use of 1.5 Billion Dollars in ‘Hardest Hit Fund’ Foreclosure-Prevention Funding
Posted By susanne On June 23, 2010 @ 4:09 PM In Consumer News and Advice,Home Owner News,Homeowner's Toolkit,Real Estate,Real Estate Information,Real Estate News,Real Estate Trends,Today's Marketplace | Comments Disabled
RISMEDIA, June 24, 2010—State Housing Finance Agencies (HFAs) in Arizona, California, Florida, Michigan and Nevada can begin to use $1.5 billion in “Hardest Hit Fund” foreclosure-prevention funding under plans approved recently by the Obama Administration. This aid will support innovative local initiatives to assist struggling homeowners in those states, as part of the first round of funding available under this new program.
“These states have identified a number of innovative programs that will make a real difference in the lives of many homeowners facing foreclosure,” said Treasury Assistant Secretary for Financial Stability Herbert M. Allison, Jr. “While we’ve made important progress stabilizing the housing market and keeping responsible families in their homes, the Obama Administration will continue to do everything it can to help those who are struggling the most during this difficult time. Today marks an important milestone for delivering relief to homeowners through the Hardest Hit Fund program.”
President Obama established the Housing Finance Agency Innovation Fund for the Hardest Hit Housing Markets (“Hardest Hit Fund”) in February 2010 to provide targeted aid to families in the states hit hardest by the housing downturn. The states approved to receive aid as part of the first round of funding provided through this program each experienced a 20% or greater decline in average housing prices.
Each state Housing Finance Agency (HFA) gathered public input and created Hardest Hit Fund programs designed to meet the unique challenges facing struggling homeowners in their respective housing markets. The five HFAs submitted their Hardest Hit Fund proposals to Treasury on April 16. Treasury then reviewed each state’s proposals to ensure compliance with the Emergency Economic Stabilization Act (EESA) and offered technical assistance to develop performance and reporting metrics. Approved states will now begin to set up and roll out their specific Hardest Hit Fund programs in order to provide relief to struggling homeowners as soon as possible, with specific implementation timing depending on the types of programs offered, specific state-level procurement procedures and other factors.
The proposals include programs to assist struggling homeowners with negative equity through principal reduction; assist the unemployed or under-employed make their mortgage payments; facilitate the settlement of second liens; facilitate short sales and/or deeds-in-lieu of foreclosure; and assist in the payment of arrearages.
In March 2010, the Obama Administration announced a second round of Hardest Hit Fund aid totaling $600 million for five additional states with high areas of concentrated unemployment: North Carolina, Ohio, Oregon, Rhode Island and South Carolina. The proposals that these states submitted are currently being reviewed.
A state-by-state summary of the Hardest Hit Fund proposals is available below.
Arizona ($125.1 million)
-Arizona will provide assistance in the form of principal reduction, interest rate reduction, and/or term extension programs with the goal of allowing borrowers to enter into a permanent modification program.
-In circumstances where a second lien is prohibiting modification of a first lien, the state will provide assistance toward elimination of the second lien.
-The state will also offer assistance to the under-employed while they seek new employment. This assistance may be used to pay monthly mortgage payments or remove second mortgages where that second lien is prohibiting the modification of a first lien.
California ($699.6 million)
-California will provide assistance to reduce principal with earned principal forgiveness.
-The state will also target funds to address delinquent loan arrearages.
-California will offer a mortgage payment subsidy to unemployed families.
-Provide funds to assist families that have executed a short sale or deed-in-lieu of foreclosure transition to a stable housing situation.
Florida ($418 million)
-Florida will offer mortgage payment assistance to the unemployed and under-employed while they seek re-employment.
-The state will also offer principal reduction or second lien extinguishment if necessary to achieve a mortgage modification.
Michigan ($154.5 million)
-Michigan will subsidize an unemployed borrower’s mortgage payments while they search for employment.
-The state will assist with loan arrearages for those who can sustain homeownership and have undergone a financial hardship.
-The state will assist homeowners with negative equity through earned principal forgiveness.
Nevada ($102.8 million)
-Nevada will create a mortgage modification program using a combination of forgiveness and forbearance with a goal of reducing principal to less than 115% of LTV (loan-to-value) and lowering payments to 31% of DTI (debt-to-income).
-The state will also offer assistance to reduce/eliminate second liens with earned forgiveness over a three-year term.
-Additionally, the state will provide allowances for appraisal and transaction fees, moving fees, a legal allowance for up to three months, and a combination of incentives for borrowers and servicers to facilitate short sales.
For more information, visit www.financialstability.gov .
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