Gov't Plans Twin Programs To Help Homeowners


Frustrated by the housing market’s inability to rebound post-Great Recession, the Obama administration plans to roll out two new programs this autumn that may help Americans keep their homes. One is all about refinancing, while the other will provide “emergency” help for unemployed homeowners.

Beyond a doubt, homeowners need help if they want to avoid going into foreclosure. According to Lending Processing Services, home mortgage delinquencies were up 2.3% in May, up to 9.2%. And even worse, the firm says about 7.3 million home loans are in some form of delinquency.

The federal government wants to knock those numbers down, and its plan is a two-pronged approach:

  1. Offer an emergency home loan program for the unemployed.
  2. Provide government mortgage refinancing for struggling homeowners who can’t obtain a new mortgage loan.
    The announcement came from U.S. Housing and Urban Development (HUD) Director Shaun Donovan, during an appearance on CNN on   Sunday, Aug. 29.

“We’re going to continue to make sure folks have access to home ownership,” Donovan said.

One move the government likely won’t make is to resurrect the homebuyer’s tax credit, which economists say was instrumental in propping up the U.S. housing market in early 2010, but has since hurt the market after expiring last April. Since then, American homebuyers have shied away from the market, no longer tempted by the $8,000 tax credit for new homeowners and a $6,500 tax credit for existing homebuyers.

Consequently, the two programs represent a new direction for Uncle Sam.

The first program is aimed at the unemployed, who comprise 9.6% of the potential adult workforce, according to the latest U.S. Labor Dept. statistics for Aug. 2010.

According to HUD, the federal government’s “Hardest Hit Fund”, which is funded through the Housing Finance Agency (HFA), will make available $2 billion for U.S. homeowners who can’t make payments due to unemployment. Another $1 billion will be earmarked under broader conditions – for the unemployed, or for homeowners who have suffered a medical hardship, or who have had hours cut at work.

“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.”

The other initiative is aimed at U.S. homeowners who need to refinance to save their homes, but can’t get a mortgage loan.

The refinancing program will act as an extension of the federal government’s Homeowner Affordability and Stability/Making Home Affordable Plan (HAMP). The new plan counts on direct government loans to homeowners who’ll be able to take advantage of historically low mortgage interest rates. The program is geared toward homeowners who need to refinance but have credit scores below 700 and less than 20% of equity remaining in their homes.

For millions of Americans worried sick about their homes falling into foreclosure, the programs may be manna from heaven – if they get help in time.

If you think you might be eligible for the refinancing plan, visit the government's loan modification website.

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