As loan program nears end, a race to help homeowners
Amid concerns that not enough unemployed Massachusetts homeowners have applied for zero-interest federal loans intended to help them make mortgage payments, state officials yesterday began a campaign to generate more interest in the $61 million program before the application period expires in two weeks.
The Emergency Homeowners’ Loan Program is expected to benefit more than 1,200 out-of-work Massachusetts residents by allowing them to borrow money for up two years. In certain cases, the loans will not have to be repaid.
But the Massachusetts Communities Action Network, a nonprofit that has long lobbied for unemployment assistance, said only a few hundred homeowners have submitted applications since June 20, when the program opened. Housing advocates attribute the slow response to a lack of knowledge about the availability of the loan money, as well as some homeowners’ wariness about offers of mortgage relief.
“If you are out of work, having trouble making ends meet and facing foreclosure, this loan program has the potential to help you get back on your feet,’’ said Lieutenant Governor Timothy P. Murray, who has started speaking out to publicize the program.
Nationwide, the government is offering $1 billion in bridge loans. It is one of a growing number of efforts to help jobless homeowners, who are now viewed as a major reason behind the country’s continuing foreclosure crisis.
Another federal program, unveiled yesterday, will allow qualified unemployed homeowners to stop making mortgage payments for up to a year.
The Department of Housing and Urban Development said the effort should help tens of thousands of unemployed US homeowners, including many in Massachusetts, whose loans are guaranteed by the Federal Housing Administration – about 14.3 percent of current mortgages.
Until now, jobless homeowners with FHA loans have been allowed so-called forbearance periods of four months.
In addition to the FHA change – which takes effect next month – the Obama administration said it will now require lenders participating in the federal Making Home Affordable Program – set up to speed loan modifications – to extend their minimum forbearance periods from three months to a year, when possible.
“The current unemployment forbearance programs have mandatory periods that are inadequate for the majority of unemployed borrowers,’’ said Shaun Donovan, secretary of the Department of Housing and Urban Development.
By extending the nonpayment period, Donovan said, homeowners will have more time to find work and stabilize their finances.
Lewis Finfer, executive director of the Boston-based Massachusetts Communities Action Network, said both the HUD policy change and the bridge loan program are important because they give homeowners more time to solve their financial problems.
Finfer applauded state officials’ efforts to better promote the bridge loans as the July 22 application deadline nears. The program, approved by Congress last summer, was supposed to be up and running by the end of 2010, but various complications slowed its start date.
Applications were finally made available in late June and the money needs to be allocated by the end of September.
To qualify, homeowners’ income must have dropped by at least 15 percent due to unemployment, a pay cut, or a health emergency.
They also must be at least three months behind on their mortgage and facing foreclosure. If borrowers remain current on payments and stay in the same house for at least five years, the principal amount will be reduced by 20 percent annually.
Doug Robinson, spokesman for NeighborWorks America, a Washington, D.C., nonprofit that is helping administer the loan program, said it doesn’t know precisely how many people have applied.
But he said 80,000 online applications have been downloaded, more than twice the number of homeowners expected to receive financial assistance.
“We have seen strong homeowner response,’’ Robinson said.
To better advertise the program, Murray and state Department of Housing and Community Development Undersecretary Tina Brooks created an informational video that they released yesterday.
To apply for a loan, call 855-346-3345 or go to www.nw.org/ehlp for more information.
“I encourage any homeowner who is facing foreclosure due to unemployment to find out if they are eligible,’’ said Brooks. “This will serve as an important relief to families who were hardest hit by the recession.’’
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