A new HUD program started today that will provide emergency support for unemployed homeowners. The program (which can be found under the “Featured News” section on HUD’s website), was announced in August and will provide some borrowers with $50,000 bridge loans to help them pay the mortgage while they look for work. $1 billion has been earmarked for the program.
According to HUD’s primer on the program, the loans will be “declining balance, deferred payment “bridge loans” (non-recourse, subordinate loan with zero interest)”. The money can be used for “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”.
The home in question would have to be a primary residence, the borrower must be three months delinquent on mortgage payments, and the owner must have a history of on-time payments (prior to the delinquency). I was fairly critical of this program when it first came out. I think the idea of helping those who have been crushed by the economy and unemployment is good, however $1 billion seems like a drop in the bucket compared to the size of the problem we are facing. Unemployment is still at 9.6 percent and broadest measure of unemployment is over 16 percent.
There are 14.9 million unemployed people in the United States (obviously they are not all homeowners who would be eligible for this program, but it gives you an idea of the magnitude of the problem). $1 billion isn’t going to do a whole lot. If each person who enrolls in the program needs $25,000 (half of the maximum loan amount, I have no idea what the actual average request will be), 40,000 homeowners could be helped by this program. A lot of people are estimating that the number of foreclosures that will occur over the next year or two is between 2-4 million (although foreclosuregate may change this, nobody knows).
This program is well-meaning, but not nearly enough. It strikes me as a political gesture more than anything.
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Dmitriy
October 7, 2010 @ 9:52 am
From HUD:”Recipient Geography: HUD will assist borrowers living in Puerto Rico and the 32 states otherwise not funded by Treasury’s Innovation Fund for Hardest Hit Housing Markets program”
so I think states with major problems like CA, FL, MI, NV, IL etc are not participating
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