By Roberta M. Gubbins
Legal News
"In February 2010 the federal administration worked through U S Treasury to create programs that would help homeowners who were in the hardest hit states across the nation," said Jodi L. Mercer, Program & Business Development Manager, Division of Homeownership, Michigan State Housing Development Authority (MSHDA), speaking at the ICBA Bankruptcy section meeting on March 8th.
Michigan was one of those states. "We had the dubious title of being one of the worst of the worst states in the country due to high unemployment rates and home value declines."
The entity of Michigan Homeowners Assistance under MSHDA was created. It received $498.6 million through the Emergency Economic Stabilization Act (EESA). Since these are federal funds, "it limits our ability and purposes and how the funds are dispersed to help homeowners."
There are about 225 mortgage servicers, "including the big ones such as Bank of America and Wells Fargo taking part in the program," added Chad Coffman, Project Lead, Step Forward Program/Homeownership Division.
The Michigan Bankers Association, Michigan Realtors Association, the Michigan Credit Union League and the network of non-profit housing counselors were consulted and helped form the three primary programs to help homeowners.
"The first program and probably our most popular is the Unemployment Mortgage Subsidy Program," said Mercer.
The program helps individuals who are currently on unemployment, subsidizing a portion of their monthly mortgage payment. Up to the lesser of $750 or 50 percent of the existing mortgage payment for up to 12 months is provided. The homeowner is responsible for the remaining portion of the monthly payment. Homeowners may also be eligible for up to $3000 in assistance to correct an existing mortgage delinquency.
"If they go back to work on the program, we will continue to subsidize for two months to let them get back on track," she said.
Asked how long the process takes, Coffman said, "It takes about 43 days from start to finish. And a lot of that depends on homeowner cooperation in getting the documents." When the documents are complete, they contact the mortgage servicer and "it takes about 30 days from that point."
What is their obligation to pay back the money?
"They are signing a note which is a subordinate lien," answered Mercer. "It's forgivable over a five year period at the rate of 20 percent per year. If the property is sold and there is any equity, we would hope they would pay it back, but we really don't expect it."
This program is the most popular with 1934 homeowners helped to date.
The website used for the program (www.stepforwardmichigan.org) is available 24/7.
Mortgage Loan
Rescue Program
If the person is employed, but behind in their payments, this program could help. Loan funds up to $10,000 can be applied toward the homeowner's delinquent mortgage payments, delinquent property taxes (if escrowed) and any accrued escrow shortages.
The homeowner must be able to document an involuntary hardship such as loss of income due to temporary layoff, illness or divorce.
"As long as we can document that they could make their payments going forward, this program can help them get caught up," said Mercer. "The funds can be also be used for second mortgage payments if first mortgage is up to date."
Through March 1758 families have used the Loan Rescue program.
Principal Curtailment Program
"We are addressing the situation where homeowners owed more on their property than its value," Mercer said. "Oftentimes they have a job at a lower income level so we wanted to reduce the principal balance" in order to have an affordable, lower monthly mortgage payment.
"There is up to $10,000 available for a lump sum principal balance reduction as long as loan servicer then matches that dollar for dollar," she added. "This could equate to a $20,000 dollar reduction in principal."
This program is not available on a Freddie Mac or Fannie Mae type of mortgage. Most of the success has been with small local Michigan banks or credit unions.
To date, 122 homeowners have taken advantage of this program.
What if homeowner is in bankruptcy?
"If they are in bankruptcy," Coffman said, "we do ask that they get some sort of sign off from the bankruptcy trustee to participate in our program. When we get that we move forward to contact the servicer. The servicers, particularly the big ones, may object and want the funds to come directly from the trustee."
How much of the funds have been used?
Coffman: Thirteen million of the $498.6 million has been spent.
What are the administration costs?
We are holding down costs as we can. The average admin costs for these programs are 10% --ours is 8%.
More information is available at the website or by calling toll free at 1-866-946-7432.
Published: Thu, Mar 15, 2012
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