These past few years have been tough ones for homeowners, with home prices dropping, people finding that their homes are underwater, and foreclosure filings increasing all the time. In fact, there have been almost 2 million foreclosures so far this year!
RealtyTrac® the leading online marketplace for foreclosure properties, today released its Midyear 2010 U.S. Foreclosure Market Report, which shows a total of 1,961,894 foreclosure filings — default notices, auction sale notices and bank repossessions — were reported on 1,654,634 U.S. properties in the first six months of 2010, a 5 percent decrease in total properties from the previous six months but an 8 percent increase in total properties from the first six months of 2009
With the real estate and economic crises not having much of an end in site, this past month the Obama administration put together a $1.5 billion dollar fund to help the hardest hit states.
State Housing Finance Agencies (HFAs) in Arizona, California, Florida, Michigan, and Nevada can begin to use $1.5 billion in “Hardest Hit Fund” foreclosure-prevention funding under plans approved today by the Obama Administration. This aid will support innovative local initiatives to assist struggling homeowners in those states, as part of the first round of funding available under this new program.
How The Hardest Hit Foreclosure Prevention Program Will Help
The programs for approved states will help homeowners in the following ways:
- Assist struggling homeowners with negative equity through principal reduction.
- Assist the unemployed or under-employed make their mortgage payments.
- Facilitate the settlement of second liens.
- Facilitate short sales and/or deeds-in-lieu of foreclosure.
- Assist in the payment of arrearages.
State Specific Foreclosure Prevention Programs
Of the states that have been hardest hit by foreclosures- and are a part of the program, here are details of how they will be helping. From MakingHomeAffordable.gov
Arizona ($125.1 million)
- Arizona will provide assistance in the form of principal reduction, interest rate reduction, and/or term extension programs with the goal of allowing borrowers to enter into a permanent modification program.
- In circumstances where a second lien is prohibiting modification of a first lien, the state will provide assistance toward elimination of the second lien.
- The state will also offer assistance to the under-employed while they seek new employment. This assistance may be used to pay monthly mortgage payments or remove second mortgages where that second lien is prohibiting the modification of a first lien.
California ($699.6 million)
- California will provide assistance to reduce principal with earned principal forgiveness.
- The state will also target funds to address delinquent loan arrearages.
- California will offer a mortgage payment subsidy to unemployed families.
- Provide funds to assist families that have executed a short sale or deed-in-lieu of foreclosure transition to a stable housing situation.
Florida ($418 million)
- Florida will offer up mortgage payment assistance to the unemployed and under-employed while they seek re-employment. The state will also offer principal reduction or second lien extinguishment if necessary to achieve a mortgage modification.
Michigan ($154.5 million)
- Michigan will subsidize an unemployed borrower's mortgage payments while they search for employment.
- The state will assist with loan arrearages for those who can sustain homeownership and have undergone a financial hardship.
- The state will assist homeowners with negative equity through earned principal forgiveness.
Nevada ($102.8 million)
- Nevada will create a mortgage modification program using a combination of forgiveness and forbearance with a goal of reducing principal to less than 115 percent of LTV (loan-to-value) and lowering payments to 31 percent of DTI (debt-to-income).
- The state will also offer assistance to reduce/eliminate second liens with earned forgiveness over a three-year term.
- Additionally, the state will provide allowances for appraisal and transaction fees, moving fees, a legal allowance for up to three months, and a combination of incentives for borrowers and servicers to facilitate short sales.
More Funding For Foreclosure Programs A Good Idea?
There are a lot of people that need help, but the question is, are we just throwing good money after bad by continuing these foreclosure programs? Are the programs really helping – or just prolonging the pain?
In reading up on much of the “Making Home Affordable” program, I read that of the people that got help, a high percentage of them still had problems and went into foreclosure anyway. So the question is, if we aren't really helping people anyway, just prolonging the pain – why do we keep kicking the can down the road?
What do you think? Should we continue providing foreclosure prevention assistance to homeowners? Are we just prolonging the pain -or is this and other programs actually going to help? Tell us your thoughts in the comments.
Financial Samurai says
Hmmm, sounds like a good initiative. Is $1.5 billion enough? Is this a new initiative?
Mr. Money says
The initiative is a couple of months old, but is just starting to get into full swing in the states that it was offered in as of July.
As a home owner in Florida, but living in another state, I wonder what this can do for me..I own rental property that is upside-down there. I know there are all sorts of exclusions for rental property but I am curious..
Mr. Money says
You can find details about Florida’s hardest hit program here.