This article first appeared in the St. Louis Beacon, Feb. 18, 2011 - Unemployed or underemployed Missouri homeowners should check out a new federal program that will provide $49 million to assist state residents who need emergency help with their mortgages.
The details are still being worked out, but the $1 billion Emergency Homeowners Loan Program will target American homeowners who have experienced a drop in income of at least 15 percent because of unemployment or underemployment due to the economy or a medical emergency. The program will provide zero-interest "bridge loans" of up to $50,000 that can be used to pay arrearages, including taxes and insurance, and up to 24 months of monthly mortgage payments.
The program is being managed by the U.S. Department of Housing and Urban Development and was authorized by the Dodd-Frank Wall Street Reform and Consumer Protection Act. It will assist borrowers in the 32 states not funded by the Treasury Department's hardest hit aid fund. Illinois was already designated as one of the hardest hit states and is not included in this new emergency loan program.
Eric Madkins, coordinator of the Metro St. Louis Foreclosure Intervention Task Force, said local housing counselors will be getting instructions about the workings of the program within the next few weeks. Applications for the emergency loans are not yet being accepted, but he suggested that homeowners might want to read the preliminary information available on the HUD website.
"Be watchful," Madkins said. "There should be more details in the next few weeks."
The emergency loan program will be administered by NeighborWorks America or individual states with similar programs. Beyond Housing in St. Louis is a member of the national NeighborWorks network and an active member of the local foreclosure task force.
There are eligibility requirements; the program won't help everyone who is unemployed, according to the preliminary information available on the website. Here are some of the requirements, gleaned from the HUD announcement:
- The loans are limited to single-family residences, and applicants must live in the properties.
- The applicant must have had a total household income equal to or less than 120 percent of the area median income before the loss of income.
- The applicant must be at least three months delinquent on mortgage payments and have received notification of their lender's intention to foreclose.
- The applicant must meet debt-to-income criteria and show a reasonable likelihood of being able to resume first mortgage obligations within two years.
- In a best-case scenario, the program would continue until a borrower's income is restored to more than 85 percent of former earnings. The borrower would then be transitioned out of the program and resume full responsibility for monthly mortgage payments. In a worst-case scenario, the program would last for a maximum of 24 months or until the $50,000 loan limit is reached.
- HUD will record a lien on the mortgaged property for the full amount of the loan. The loans would be forgiven if the borrower lives in the home and remains current on payments for five consecutive years.
Madkins, the senior housing director of the Urban League of Metropolitan St. Louis, said the volume of calls to local agencies that provide foreclosure assistance remains high, largely due to the still elevated unemployment rate.
He urges financially troubled homeowners to seek free counseling available at HUD-certified agencies, such as the Urban League, Beyond Housing, Catholic Charities and Better Family Life. These counselors can help consumers navigate the complicated loan mitigation process and serve as intermediaries between borrowers and lenders.
Foreclosures set a new record in 2010 in the 17 counties that comprise the St. Louis region, according to RealtyTrac, which tracks foreclosure data nationwide. One in every 57 houses in the region received some type of foreclosure filing during 2010, and local foreclosure filings rose by almost 12 percent over 2009.
