HUD brings Emergency Homeowner Loan Program

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HUD is offering bridge loans to people who are out of work and have fallen behind on their mortgage payments.

Earlier this week, The U.S. Department of Housing and Urban Development (HUD) announced a new loan program available in 32 states and Puerto Rico. “It’s a $1 billion initiative,” says Lee Jones with HUD.

The detailed release from HUD states, “The program will offer a declining balance, deferred payment “bridge loan” (non-recourse, subordinate loan with zero interest) for up to $50,000 to assist eligible homeowners with payments of arrearages, including delinquent taxes and insurance plus up to 24 months of monthly payments on their mortgage principal, interest, mortgage insurance premiums, taxes, and hazard insurance.”

HUD is offering $50,000 loans to unemployed borrowers. States all across the country are announcing how much money they’ll receive to help out-of-work home-loan borrowers. Some states, like Wisconsin, that initially did not receive funding from previous initiatives are now getting help. Wisconsin, for instance, is set to receive $51 million through this federal assistance program.

The borrowers have to be at least three months behind in their mortgage payments, “but who have a reasonable likelihood of being able to resume regular payments within two years.”

Of course, if they own a second home, they won’t qualify and it must be the borrower’s primary residence. In addition, borrowers applying for the loan must have suffered a minimum of a 15 percent decline in income as well as show that they could afford their mortgage payments prior to their decline in income. Wage and salary workers as well as self-employed people are eligible for the loan. More specific details regarding the program can be found on the site, search Emergency Homeowner Loan Program for the downloadable document.

Other states where this loan is not available have been given assistance to help borrowers through the Hardest Hit Fund which provided more than $4 billion to create programs that would help the unemployed borrowers whose homes are upside down.

Among the states getting help from the federal program is Massachusetts. The Boston Globe is reporting that $61 million is being allocated for the state and homeowners who have lost their job, depleted their savings, and are facing foreclosure.

The Emergency Homeowner Loan Program is supplementing a larger effort launched this year to help out-of-work homeowners. The US Treasury Department has already allocated $7.6 billion, spread over 18 states, to help relieve the foreclosure crisis.

In a press release, HUD Northwest Regional Administrator, Mary McBride, said “In crafting this new loan program, HUD built on the lessons learned from Treasury’s Hardest Hit initiative to design and implement a program to assist struggling unemployed homeowners avoid preventable foreclosures. Together these two initiatives represent a combined $8.6 billion investment to help struggling borrowers and, in doing so, further contribute to the Obama Administration’s efforts to stabilize housing markets and communities across the country.”

In some case, part of the loan may become a gift. Here’s the details from the HUD release on how the loan declines over the years and if the borrower is in good standing.

Terms for Declining Balance Feature: No payment is due on the note during the 5 year term so long as the assisted household maintains the property as principal residence and remains current in his or her monthly payments on the first mortgage loan. If the homeowner meets these two conditions, the balance due shall decline by twenty percent (20%) annually, until the note is extinguished and the junior loan is terminated.

The loans will be granted at the local level and administered through state and non-profit entities/agencies. Applications will be accepted by the end of the year.

by Phoebe Chongchua

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