Shaun Donovan, Department of Housing and Urban Development Secretary spoke with CNN on its “State of the Union” show about the Obama Administration’s plan to set up an emergency loan program for the unemployed and a new government mortgage effort to help homeowners.
The programs include $2 billion of additional assistance for states hit hardest by unemployment so they can help homeowners struggling to make their mortgage payments. Additionally, HUD will launch a complementary $1 billion Emergency Homeowners Loan Program to provide assistance to homeowners who are at risk of foreclosure and have experienced a substantial reduction in income due to involuntary unemployment, underemployment, or a medical condition.
RMD asked HUD whether the emergency loans could be used to help seniors with reverse mortgages pay their taxes and insurance, but the details are still being worked out. There is clearly a need for some type of government assistance after a report from the Office of the Inspector General shows that nearly 13,000 HECM borrowers are in default from failure to pay taxes and insurance.
According to HUD, the emergency loan program will be a deferred payment “bridge loan” (zero percent interest, non-recourse, subordinate loan) for up to $50,000 to assist eligible borrowers with payments on their mortgage principal, interest, mortgage insurance, taxes and hazard insurance for up to 24 months.
When asked about the National National Association of Realtors report that shows the sale of existing U.S. homes sank 27.2% in July, the Secretary said it needs to act.
“The July numbers were worse than we expected, worse than the general market expected, and we are concerned,” Donovan said during the interview. “That’s why we are taking additional steps to move forward.”