A new program to provide $1 billion of emergency mortgage relief to homeowners at risk of foreclosure will go into effect April 1st according to a notice published in the Federal Register on Friday.
Provided by the Department of Housing and Urban Development, the Emergency Homeowners’ Loan Program offers up to $50,000 in non-recourse bridge loans to assist eligible homeowners with payments on delinquent loans, including delinquent taxes and insurance for up to 24 months.
In order to qualify, a homeowner must have experienced a substantial reduction in income due to involuntary but temporary unemployment or underemployment resulting from adverse economic conditions or medical conditions and meet the requirements set in the notice. There was some hope the program could be used to assist seniors with reverse mortgages who have fallen behind on their taxes and insurance, but the guidelines make it unlikely.
In order to be eligible, there must a reasonable likelihood of being able to resume repayment of their mortgage obligations once they regain employment. The Mortgage Bankers Association asked HUD to specifically allow HECM borrowers in default to qualify for the program in a letter last year.
“Despite these restrictions, we believe HUD may be able to expand the program to seniors with reverse mortgage defaults. A significant number of seniors are unemployed/retired and may have suffered a reduction in income due to a medical condition and thus could qualify for the program.”
Homeowners have until September, 30, 2011 to obtain the funds, as long as the program isn’t shut down before it gets off the ground. The House Financial Services Committee passed a bill last week that would end the program. Rep. Jeb Hensarling (R-TX), the Committee’s Vice-Chairman, said the bill prevents $1 billion from being spent on the ineffective program. “The best foreclosure prevention tool is a job. Without more paychecks for homeowners to make their mortgage payments, it will be impossible to stem the foreclosure tide,” he said.
Committee Chairman, Rep. Spencer Bachus (R-AL) said, “we should not waste taxpayer dollars on failed government programs that do not work and actually make things worse for struggling homeowners. These programs may have been well-intentioned, but they’re doing more harm than good.”
View a copy of the requirements listed in the Federal Register notice here.