State Housing Finance Agencies (HFAs) in California and four other states can start using $1.5 billion in “Hardest Hit Fund” foreclosure-prevention funding under plans approved by the Obama Administration, the Treasury Department announced this morning.
President Obama established the fund in February to provide targeted aid to families in the states hit hardest by the housing downturn. The states approved to receive aid today as part of the first round of funding each experienced a 20 percent or greater decline in average housing prices.
Each state HFA gathered public input and created Hardest Hit Fund programs designed to meet their own states’ unique challenges. The plans were submitted to the Treasury Department in April, and the approved states can now set up and roll out their programs.
California’s share is $699.6 million, with which the state will implement its plan:
- Unemployment Mortgage Assistance (UMA) – Intended to help homeowners who have lost their jobs. CalHFA will provide a temporary mortgage payment subsidy of varying size and term to unemployed homeowners who wish to remain in their homes but are in imminent danger of foreclosure due to short-term financial problems. These funds could provide up to six months of benefits with a monthly benefit of up to $1,500 or 50% of the existing total monthly mortgage, whichever is less.
- Mortgage Reinstatement Assistance Program (MRAP) – Intended to help homeowners who have fallen behind on their mortgage payments. CalHFA will provide limited money to reinstate mortgage loans that are in arrears in order to prevent potential foreclosures – up to $15,000 per household or 50 percent of the past due amount, whichever is less, with a required dollar-for-dollar contribution match from the lender, servicer, insurer and/or borrower.
- Principal Reduction Program (PRP) – Intended to help homeowners who have severe negative equity – or are “underwater,” in the common slang. CalHFA will put up money, matched by participating financial institutions, to reduce outstanding principal balances of qualifying underwater borrowers. Principal balances will be reduced to market levels needed to prevent avoidable foreclosures and promote sustainable homeownership. The principal reduction program should most likely be a prelude to loan modification.
- Transition Assistance Program (TAP) – Intended to help stabilize communiteis by giving homeowners help in relocating when it’s determined that they can no longer afford their home. CalHFA’s transition assistance will be used along with servicer/investor short sale and deed-in-lieu of foreclosure programs to help borrowers transition into stable and affordable housing elsewhere. Borrowers will be responsible to occupy and maintain the property until the home is sold or returned to the lender as negotiated. Funds will be available on a one-time only basis.
House Education and Labor Committee Chairman George Miller, D-Martinez, issued a news release praising the funding.
“Every family in our community has felt the effects of this severe economic recession and the problems in California’s housing market,” he said. “People have lost their jobs and their homes through no fault of their own. This new federal program is intended to help homeowners in our state and to help stabilize our economy.
“Of course there is more to do, and we’re continuing our work in Congress to save and create good American jobs to turn the economy around and get people back on their feet. In the end, the best way to help avoid foreclosure is to get more Americans back to work. We’re making progress in that direction but that remains our top priority.”
The other states cleared for funding today were Arizona, Nevada, Michigan and Florida.