HUD Regional Director Rick Garcia unveils a $41.3 million program to help distressed homeowners in Colorado who have suffered a drop in income, as Shannon Peer and Mary Ann Shing of Brothers Redevelopment watch. Shing is the president and CEO of Brothers and Peer is its housing counseling director.
Colorado will receive almost $41.3 million under the federal government’s attempt to help struggling homeowners facing foreclosure, Rick Garcia, U.S. Department of Housing and Urban Development Region VIII director announced today.
Colorado ranks No. 10 in funding of the 32 state and Puerto Rico sharing in HUD’s $1 billion Emergency Homeowners Loan Program, or EHLP, that Garcia unveiled today at a press conference at the non-profit Brothers Redevelopment’s headquarters in Edgewater.
Tool to fight foreclosures
“Obviously, the Emergency Homeowner Loan Program is only important tool in our toolbox as we fight to continue our nation’s economic recovery,” Garcia said. “And it won’t help every family struggling to keep their home. But with new funding and a new commitment to helping responsible homeowners who have fallen on tough times, President Obama, our local leaders and I believe we can tackle tough challenges. We can fight foreclosure and unemployment. And we can help our communities recover.”
Qualifications laid out
To qualify for the new program, which Garcia said will become effective in December:
- Borrowers must be at least three months delinquent in their payments and have a reasonable likelihood of being able to resume repayment of their mortgage payments and related housing expenses within two years.
- The property must be the principle residence of the borrower, and eligible borrowers may not own a second home.
- The borrower must have suffered at least a 15 percent reduction income and have been able to afford their mortgage payment prior to the event that triggered the lost income.
The new emergency loan program will provide a forgivable, deferred payment “bridge loan,” to qualified borrowers. It will be a zero-interest loan, non-recourse, subordinated loan. Non-recourse means that the borrower is not personally liable, and if there is a default, the lender’s only recourse it to take over the underlying property.
HUD will delegate key program administration functions to the non-profit NeighborWorks America, a national network of affiliated counseling agencies. Nonprofit housing counselors who are part of the National Foreclosure Mitigation Counseling Program will coordinate counseling, preparing documents, and outreach. HUD will use NeighborWorks to contract with loan servicing groups, which handle the day-to-day functions of handling things such as collecting mortgage payments.
In addition, state housing finance agencies that operate similar programs will receive allocations to fund emergency loans for borrowers.
Government helping market
When InsideRealEstateNews asked Garcia about critics who claim that the housing market would recover faster it the government stepped aside and let the market heal itself, Garcia said that, “I think largely the market probably is designed to heal itself.” However, the government does “feel some responsibility to stabilize communities,” as the foreclosure spiral impacts not only the impacted borrowers, but can lower property values and hurt entire neighborhoods.
“Most important of all is that these resources reach the families and communities that need it the most,” Garcia said. The EHLP is combined with the Treasury Department’s “Hardest Hit” initiative, which combined provides a {$8.6 billion investment that will ultimately help a broad group of struggling borrowers across the country.”
Funding for the EHLP comes from the Dodd-Frank Wall Street Reform and Consumer Protection Act.
One size doesn’t fit all
Shannon Peer, manager of housing counselors at Brothers Redevelopment, said that calls to the Colorado Foreclosure Hotline, 1-877-601-HOPE, continue at record levels.
“And the main reason we are most people are calling today, and probably for the last eight to 12 months, is because of unemployment or some loss of income,” Peer said. He said that is why they are pleased to have “this new tool” to help distressed homeowners. While he welcomes the program, “there is no single fix to this crisis,” Peer added.
Zach Urban, spokesman for the Adams County Housing Authority, said he worries the new program will help lenders more than homeowners. “It’s sounds to me like a $1 billion payday for lenders,” Urban said. But he said the jury is still out on the program until more details are released. “If it does help homeowners, then I am in favor of it,” he said.
Stephanie Riggi, manager of the Colorado Foreclosure Hotline, agreed.
“I wouldn’t say I’m skeptical,” Riggi said. “I think for our counselors to have more options to offer to homeowners is always a good thing. We just don’t have a whole lot of details yet.”
Contact John Rebchook at JRCHOOK@gmail.com
