Gov’t to Aid Underwater Homeowners

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NEW YORK (MainStreet) — The federal government has given the green light for five states to start lending money to underwater homeowners. The loans of up to $50,000 target mainly unemployed homeowners, a significant portion of the U.S. population with the unemployment rate at 8.8% and 13.5 million Americans out of work. And according to Gallup, the actual U.S. unemployment rate is 10%, and the “under-employment rate,” which includes part-time workers seeking full-time work, is 19.3%.

The government isn’t taking any chances regarding unemployed homeowner's ability to repay their mortgages, hence the five-state rollout of the $1 billion Emergency Homeowner's Loan Program, which will go to Pennsylvania ($106 million), Maryland ($40 million), Connecticut ($33 million), Idaho ($13 million) and Delaware ($6 million).

The program was included in the Dodd-Frank Financial Reform Act of 2010, and is meant to work in conjunction with nonprofit programs that also offer mortgage loans to struggling homeowners. The initial beneficiaries were chosen for having the lowest number of those non-governmental programs.

The funding comes directly from the Department of Housing and Urban Development (HUD) and is expected to help 30,000 U.S. families keep their homes. Altogether, 27 states are expected to receive funding through the program by the end of 2011.

State leaders are welcoming the money with open arms and have already laid out some guidelines for homeowners desperately looking for help in paying their mortgages.

"This funding will help Pennsylvania families under threat of foreclosure, while also benefiting local economies by keeping more homes off the foreclosure rolls," said Pennsylvania Governor Tom Corbett. "These families will gain time to get back on their feet, and communities will benefit as their local home values remain stable."

In Pennsylvania, the program is directed at homeowners facing immediate foreclosure. Such homeowners can get a bridge loan of up to $50,000, with no interest payments, and according to the Pennsylvania’s governor’s office, homeowners can get loans covering mortgage payments in arrears and up to 24 months of future mortgage payments. The cash can also be used to pay for mortgage insurance and property taxes.

Pennsylvania residents can apply for the program through the Pennsylvania Housing Finance Agency (PHFA) Homeowners' Emergency Mortgage Assistance Program by calling 1-800-342-2397 or visiting the agency’s website.

To qualify for the program, they’ll need to clear these hurdles:

  • Homeowners must have incurred a reduction in income due to involuntary unemployment, under-employment, or medical reasons. Current gross income must be at least 15% lower than pre-event income.
  • The homeowner must be at least three payments delinquent on his or her mortgage.
  • The homeowner must have a reasonable likelihood of being able to resume repayment of the first mortgage obligation within two years.
  • The property must be owner-occupied and be the homeowner's principal residence.

For information regarding program funding for other states, visit Neighbor Works America, which is administering the program for Uncle Sam.

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