Emergency Homeowner Loan Program

The Dodd-Frank Wall Street Reform and Consumer Protection Act provided $1 billion to HUD to implement the Emergency Homeowners Loan Program (EHLP). Massachusetts received an allocation of $61,036,001, which should assist 3-4,000 homeowners.

EHLP provides eligible homeowners a bridge loan for up to $50,000 to assist with (1) delinquent mortgage, taxes and insurance payments, and (2) payments of mortgage, taxes and insurance up to 24 months. The assisted homeowner's contribute 31% of their gross monthly income at the time of the application, and EHLP funds will be used to pay for the remaining balance.

Eligibility requirements include:

• Prior to the loss of income, household income equaled or was less than 120% of Area Median Income.
• Current gross income is less than 15% lower than previous income.
• 3 months delinquent on payments and have received notification of the intention to foreclose.
• Ability to resume payments within 2 years.

Once the income of the homeowner is restored to more than 85% of their former earnings, they are transitioned out of the program and responsible for making monthly payments. HUD records a lien for the EHLP loan; however, no payments are required to be made during the 5-year term as long as the homeowner makes the current payments. The balances due on EHLP loan declines by 20% annually.

As for the administration of the program, HUD will enter into agreement with NeighborWorks to identify housing counselors who can provide the required services. For more information, click here for the fact sheet.

Helping Families Save Their Homes Act 2009

On May 20, President Obama signed the Helping Families Save Their Homes Act (S. 896) into law. As detailed in a White House summary, the law modifies the Hope for Homeowners (H4H) program to make it usable by more borrowers, facilitates the modification of FHA loans and Rural Housing Service guaranteed loans, and extends the temporary increase in maximum FDIC-insured deposit amount ($250,000) and credit union insured accounts. In addition, it authorizes appropriations of $60 million a year in FY2010 and FY2011 for housing counseling and outreach to prevent mortgage rescue scams. It also includes protections for renters in foreclosed properties, including Section 8 tenants, through December 31, 2012, by requiring at least a 90 day notice to vacate and honoring existing leases. One provision gives states some flexibility to use Neighborhood Stabilization Program (NSP) funds outside targeted areas.

The Home Affordable Loan Modification program, also known as HAMP, in March, 2009. HAMP is voluntary for both servicers and homeowners. HAMP reduces a homeowner's monthly mortgage payment to 31 percent of their verified gross (pre-tax) income to make their payments more affordable.
To qualify for HAMP, a household must: 1) Own a one- to four-unit home that is their primary residence;2) Have received the mortgage on or before January 1, 2009;3)Have a mortgage payment (including principal, interest, taxes, insurance, and homeowners association dues) that is more than 31 percent of gross (pre-tax) monthly income; and 4)Owe an amount that is less than or equal to $729,750 on the first mortgage for a one–unit property (there are higher limits for two– to four– unit properties).

Homeowners who qualify for HAMP must complete a trial period of three or four months to demonstrate that they will be able to make their reduced payments on time before their mortgage will be permanently modified. To create an affordable payment, the mortgage servicer applies a series of modification steps in the following order: 1) rate reduction to as low as two percent; 2) term extension up to 40 years; and 3) principal forbearance (or deferral). A portion of the principal can also be forgiven, although that is optional on the part of the servicer.

The modified interest rate will be fixed for a minimum of five years as specified in the modification agreement. Beginning in year six, the rate may increase no more than one percentage point per year until it reaches the Freddie Mac Primary Mortgage Market Survey rate (essentially the market interest rate) at the time your permanent modification agreement was prepared. For every month a homeowner makes a payment on their permanent modification on time, they can accrue an incentive of $1,000 each year to reduce the amount of principal they owe, up to $5,000.

Homeowners can discuss this option with their servicer, a foreclosure prevention counseling agency or call 1-888-995-HOPE (4673) to learn more.

The Housing and Economic Recovery Act of 2008 

On July 30, 2008, the President signed the Housing and Economic Recovery Act of 2008 into law (H.R. 3221, now Public Law 110-289).   As detailed in a CHAPA summary, the wide-ranging bill includes many affordable housing provisions and authorizes:

• A new Affordable Housing Trust which will provide grants to states and localities starting in 2010, primarily for rental housing programs for extremely low income households.  The Trust will be funded through assessments on Fannie Mae and Freddie Mac.  Assessments will also fund a new Capital Magnet Fund which can be used for both affordable housing and related community facilities and economic development activities.
  
• A new FHA insurance program (HOPE for Homeowners) for refinance mortgages for homeowners with currently unaffordable mortgages (starts October 1).
  
• A $3.92 billion grant program for states and localities to address foreclosed properties.
  
• $180 million in additional foreclosure counseling funds.
  
• A new regulator for Fannie Mae, Freddie Mac, and the Federal Home Loan Banks, and new affordable housing goals for each.
  
• Temporary increases in LIHTC and tax-exempt bond allocations to states (20 cents a year per-capita for LIHTC in 2008 and 2009 and $11 billion nationwide for tax-exempt bonds in 2008).
  
• Revised rules for a number of HUD programs, including LIHTC, tax-exempt bonds, Section 8 Project Based Vouchers and Shelter Plus Care.
  
• A temporary tax credit for first time homebuyers.
  
• New mortgage disclosure and loan originator licensing and registration requirements.

Emergency Economic Stabilization Act of 2008" (EESA) – H.R. 1424

Summary of Foreclosure-Related Provisions

Title I of the "bailout" bill (H.R. 1424), signed into law on October 3, creates a new Troubled Assets Recovery Program (TARP) under which the Treasury Department can purchase residential and commercial mortgages, mortgage backed securities and other mortgage-related assets originated or issued before March 14, 2008, as well as other assets as needed. 

Four sections include language related to foreclosure assistance and renter protections.  Three lay out steps the Treasury Department must take regarding the mortgage-type assets they acquire and that other federal agencies (FDIC, FHFA, FHA) must take in relation to any mortgage-type assets they own, requiring them to: (1) develop a plan to "maximize" assistance to owners; (2) encourage loan modifications that recognize owners' for operating costs and that protect tenants with leases and/or rent subsidies; and (3) develop a coordinated plan to prevent foreclosures and encourage modifications.  The fourth provision modifies the new FHA HOPE for Homeowners program, expanding eligibility and allowing upfront payments to subordinate lienholders to facilitate loan modifications. The bill also creates a Congressional Oversight Panel that, among other things, must review the financial market regulatory system and recommend improvements by January 20, 2009 and requires the Treasury Department to do the same by April 30, 2009. 

For a full summary of all of the provisions, please click here.

*For more federal legislative updates, please visit CHAPA's Federal Housing Policies page.

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