Treasury Awards Second Round of "Hardest Hit" Housing Funds

The Department of the Treasury has announced the second round of awards under its 4HM or Help for the Hardest-Hit Housing Market Fund established by President Obama in February. 

The five states, all suffering high levels of unemployment coupled with significant declines in home values are:  North Carolina, Ohio, Oregon, Rhode Island, and South Carolina.  The states will share in $600 million in grants to State Housing Finance Agencies (HFAs) with programs designed to prevent foreclosure.  The states estimate they can assist approximately 50,000 struggling homeowners with the grants.    

First round awards totaling $1.5 billion were made to five states, Arizona, California, Florida, Michigan and Nevada, in June.  The program is targeted to states with high unemployment and where a high percent of the population is living in areas of economic distress due to unemployment and housing prices have declined at least 20 percent from their peak.  

The most recent proposals include programs targeted at expanding options for homeowners struggling to meet mortgage payments and programs addressing first and second liens, short sales, and deeds-in-lieu of foreclosure.

"These states have designed targeted programs with the potential to make a real difference in the lives of homeowners struggling to make their mortgage payments because of unemployment," said Treasury Assistant Secretary for Financial Stability Herb Allison. "While the Obama Administration has already taken critical action to strengthen the housing market and create jobs, we are committed to doing everything we can to immediately help those who are hurting the most during these tough times."

In order to receive the awards, HFAs gathered public input and designed the programs they felt would meet the specific challenges in their individual states.  Plans were evaluated by the Treasury Department for compliance with the Emergency Economic Stabilization Act of 2008 (EESA) which provided the funds.  Treasury also offered technical assistance to develop performance and reporting metrics.

North Carolina which received $159 million will provide funds so unemployed and cash-strapped homeowners can pay mortgage and mortgage-related expenses during job training or while looking for employment.  The state will work with lenders to refinance existing second mortgages in cases where those junior liens are impeding loan modifications and will also assist lenders in reducing principal on some mortgages in order to make monthly payments more affordable.  The state estimates that they will assist up to 7,190 homeowners.

Ohio estimates that 15,356 homeowners will be aided by programs to help unemployed borrowers pay their mortgages for up to 12 months while searching for a new job or undergoing job training or to bring delinquent mortgages current where borrowers have experienced hardships due to a reduction or loss of income. The state will also set up a modification program to incentivize lenders and servicers to reduce a homeowner's mortgage principal balance to a target 115 percent or less of the loan-to-value, at which point the loan may be eligible for HAMP or another modification. Finally, to facilitate a short sale or deed-in-lieu of foreclosure, the state will provide an incentive payment to the servicer as well as relocation aid to the borrower and payments in exchange for the release of second liens.  Ohio will receive $172 million.

Oregon's initiatives include funds to assist with loan modifications through principal reduction and/or arrearage payment.  It will also provide assistance to borrowers that participated in the state's Hardest Hit Fund unemployed borrower program but did not subsequently become employed in order to facilitate a short sale or deed-in-lieu.  The latter program will be matched by lenders or servicers.  The state projects assisting up to 7,400 homeowners with the $88 million grant.

Rhode Island will provide assistance to homeowners who cannot, without that assistance, participate in the federal Home Affordable Modification Program (HAMP) and assist borrowers who are not eligible for HAMP to achieve other types of loan modification.  The state will also provide payment assistance to homeowners who are at risk of foreclosure because of an immediate or temporary financial crisis, and funds to facilitate a short sale or deed-in-lieu and assist with relocation where homeowners in crisis can no longer stay in their homes.  Rhode Island will receive $43 million and estimates it will serve up to 5,000 of its residents.

Finally, South Carolina will use $138 million to assist homeowners who are unemployed or experiencing a short-term loss of income by making part or all of their mortgage payments for a period of time. Borrowers who have regained the ability to pay their mortgages after a financial crisis but have residual arrearages, late changes or a reduction in principal can receive assistance with those amounts.  The state will also provide funds to servicers so borrowers can become HAMP eligible or to modify second liens.  Funds will also be available to incentivize lenders to accept deeds-in-lieu and to assist with relocation expenses. The state anticipates assisting up to 12,000 homeowners.