$3 billion allocated for jobless homeowners
The Obama administration announced Wednesday that as part of an effort to stabilize housing markets it will send a $3-billion lifeline to jobless homeowners struggling to make mortgage payments.
Tapping into resources from the $700-billion Wall Street bailout, the Treasury Department will add $2 billion to its Hardest Hit Fund, assisting the 17 states that have unemployment rates higher than the national average, along with Washington, D.C.
California will receive $476 million, the most of any state.
A new $1-billion program led by the Department of Housing and Urban Development, or HUD, will help homeowners who are at risk of foreclosure due to involuntary unemployment, underemployment or a medical condition. They can receive interest-free loans for as much as $50,000 for up to two years.
Officials said they would not have an estimate of how many people would benefit from the programs until next month.
But given the grim housing forecast, Campbell Harvey, a professor of international business at Duke University, said the latest efforts were unlikely to make much of a difference.
“It’s a drop in the bucket,” he said. “It will certainly help the people that actually get the loan. But in terms of the overall situation, it’s so small that it’s not going to have an economy-wide impact, and that’s the sort of thing people are looking for.”
The financial reform bill signed into law by President Obama last month paved the way for the launch of the Emergency Homeowners Loan Program.
Working with state and nonprofit groups, the HUD program will give “bridge loans” to borrowers who are at least three months delinquent in their payments but likely to begin repaying their mortgage within two years. To be eligible for the program, borrowers must show a strong repayment record before the loss or drop in income. The loans will help them pay their mortgage principal, interest, mortgage insurance, taxes or hazard insurance.
The Treasury Department’s Hardest Hit Fund, which was announced in February, initially extended $1.5 billion to five states. In March, $600 million was provided to five more states.
The states that have already received funding, including California, can use the latest resources to continue support for existing programs or start new efforts to help homeowners make their mortgage payments as they hunt for jobs.
“Conditions differ dramatically in different parts of the country. The point of the Hardest Hit Fund is to give states flexibility to tailor programs to local needs,” said Herbert M. Allison Jr., the Treasury Department’s assistant secretary for financial stability. “We know there is a need locally for this funding.... We think it meets a defined need, and we’re confident that this is going to be fully utilized.”
The rate of foreclosures in the United States remains steep. Irvine-based RealtyTrac Inc. found that a record 269,962 U.S. homes were repossessed by banks in the second quarter of this year.