The U.S. government’s program to bring relief to homeowners in jeopardy of foreclosure is designed to bring tailor made solutions to the 10 states in the program. The plan, known as the Hardest Hit Fund (HHF) is being administered through the Troubled Asset and Relief Program with $2.1-billion for homeowners in distress.
White House officials say the objective of the program is to allow state Housing Finance Agencies to develop and create “effective approaches” that will help homeowners under water on their mortgages, who owe more money on their loans than the property is worth or in financial hardship due to unemployment, under-employment or economic hard times.
The sweeping series of programs is intended to help stabilize the housing market, including the stability of home prices, preserve home ownership and promote economic growth. Millions of mortgage borrowers in the ten most severely impacted states are targeted for the aid in California, Florida, Oregon, Arizona, Nevada, Michigan, Rhode Island, Ohio, North Carolina and South Carolina.
The White House plans are being targeted at only owner occupied homes, and not investment, commercial properties or land.
Through the program the Treasury Department is targeting six possible types of transactions that would meet the plan’s requirements. The unemployment sector may provide temporary assistance to unemployed or under-employed mortgage borrowers to help avoid foreclosure. Mortgage modifications could provide relief to homeowners on loans held by state Housing Finance Agencies or other financial institutions. Programs may be offered to borrowers that pay down “all or a portion of an overleveraged loan” and take a promissory note in exchange.
Short sales are also an option under program guidelines, and if selling a home at a lower price than what is owed on the property isn’t possible homeowners may be able to sign away their rights to the property as a deed in lieu of foreclosure.
Programs may also be offered to reduce mortgage principal for borrowers with severe negative equity in a home. Bankers will be paid a portion of the loss under the program in exchange for cutting the amount of principal. Second mortgages or lines of credit may also be reduced or modified.
Treasury Department officials will announce the rules governing state housing agencies for the five latest states added to the program within two weeks. The agencies will be required to track and account for the money dispersed through their agencies and report to the Treasury on “a periodic basis” on how they are administering the aid.