2010’s ‘Hardest Hit Fund' Providing Slow Mortgage Relief

Early in 2010, U.S. Treasury Officials established the “Hardest Hit Fund” to provide more than $7.6 billion for struggling homeowners, including those unemployed, in 17 states hit hardest by the economic crisis.
But since then, state housing finance agencies responsible for helping these families avoid foreclosure, with the assistance of lenders and investors, have only used a fraction of the billions provided to the states.
The top five states with the largest funding allocations totaling nearly $4.6 billion – California, Florida, Ohio, Michigan, and North Carolina  – have only provided a total of $129 million to more than 19,000 borrowers through the fourth quarter of 2011.
California was allocated $1.9 billion and has provided $38.6 million through the end of 2011.  Florida was allocated $1.05 billion and has provided $14.4 million. Ohio was allocated $570 million and has provided $34 million. Michigan was allocated $498 million and has provided $10.4 million. And North Carolina was allocated $482 million, but has only allocated $31.7 million.
In total, $7.6 billion had been allocated to 17 states, and the District of Columbia.
The fund is administered by the Housing Finance Agencies, independent entities that operate under the direction of board of directors appointed by each state’s governor.
The state agencies can use the aid to help troubled homeowners move into the government’s mortgage-reduction program, Home Affordable Modification Program, HAMP.
States eligible to receive the support for unemployed homeowners have all registered an unemployment rate at or above the national average over the past 12 months.
According to a report by the Los Angeles Times, state officials blame a lack of willingness by lenders to write down mortgages for the Hardest Hit Fund’s poor track record. Mortgage principal reduction is one component of the multi-faceted program.
California, Nevada and Arizona had planned to help borrowers if banks and loan investors agreed to reduce the principal owed on a mortgage by a matching amount. For example, a $25,000 principal reduction from the lender would be doubled to $50,000 in relief for the borrower, the Times reported.
State officials said banks, loan investors and the government-subsidized mortgage giants Fannie Mae and Freddie Mac would not go along with the plan, the newspaper said.
Federal and state officials say the program started slowly, but insist it is starting to gain ground.
In addition to the funds used by the end of 2011, “considerably more has been committed,” Mark McArdle, director of the Hardest Hit Fund for the Treasury Department told the Los Angeles Times.
California had allocated $50 million through the end of February and estimates that $200 million is in the pipeline.
The Hardest Hit Fund programs vary state to state, but may include:

  • Mortgage payment assistance for unemployed or underemployed homeowners
  • Principal reduction to help homeowners get into more affordable mortgages
  • Funding to eliminate homeowners’ second lien loans
  • Help for homeowners who are transitioning out of their homes and into more affordable places of residence.

For more information, visit Treasury’s Hardest Hit Fund page.

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