The September 29, 2011 final deadline for the Emergency Homeowner’s Loan Program passed without much fanfare, but it left in its wake several hundred thousand mortgage holders who desperately needed financial assistance to keep their homes. Officials at the U.S. Department of Housing and Urban Development (HUD) estimate that only about “10,000 to 15,000 homeowners of the original 300,000 projected ultimately qualified [for the program].”
In its short three months of existence, roadblocks such as electronic database development and coordination between government programs, mortgage lenders, and nonprofit housing groups tasked with managing the application process, the program’s leadership found themselves frustrated and unable to help the nearly 300,000 thousand Americans who were struggling to keep their homes from the clutches of bank foreclosure.
The program was faced with a litany of obstacles right out of the legislative gate and didn’t come online until June 2011. With a mere six-week application period, the program saw tremendous interest and was forced to extend the deadline multiple times finally closing on September 29, 2011. Even after the extension, the guidelines responsible for selecting eligible homeowners were making it nearly impossible to find homeowners who could actually qualify.
Passed in 2010 as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act, the original intent of EHLP was to provide interest-free, forgivable loans to homeowners who either became unemployed or underemployed as a result of the economic downturn or suffered a serious illness (in the last year only) and could no longer make timely mortgage payments. The homeowner would need to demonstrate a financial loss of 15 percent or more of their 2009 reported income and had to be at least 90 days delinquent in their mortgage payments and facing foreclosure proceedings. Lastly, the homeowner(s) had to be able to show that s/he could actively resume payments on the loan should new employment be secured. If all of the qualifications were met, applicants could receive up to $50,000 or 24 months of federal assistance whichever was greater. Another glitch in the requirements meant that those homeowners in high cost of living areas like New York City would almost certainly expense themselves out of the program because the value of their property and the amount of back mortgage payments far exceeded the $50,000 loan maximum available. Applicants needing even $1 more than the $50,000 threshold were automatically excluded from the program.
The beauty of EHLP was that it was created to be a stop-gap program for those unemployed or severely ill homeowners who were falling through the cracks and did not qualify for other types of Federal assistance programs. But the program fell substantially short due to filing obstacles, a very late roll out and inability for most applicants to qualify. “No one could have anticipated how difficult the statutory requirements make it to reach homeowners,” says Lemar Wooley, a HUD spokesman in an interview with CNN Money.
The enormity of this failure will ultimately result in more families on the brink of losing everything, tumbling off the rocky abyss into financial ruin. The money allocated to the program has since been returned to the federal government leaving hundreds of millions of dollars on the table rather than going to those for which they were intended.
Sources:
Buckley, Cara. (September 30, 2011). U.S. Mortgage-Aid Program is Shutting Down, With Up to $500 Million Unspent. NY Times. Retrieved from http://www.nytimes.com/2011/09/29/nyregion/emergency-homeowners-aid-ending-with-up-to-500-million-unspent.html
Luhby, Tami. (October 3, 2011). Mortgage Help for Unemployed Disappears. CNN Money. Retrieved from http://money.cnn.com/2011/10/03/news/economy/mortgage_unemployed/?source=cnn_bin