Government Mortgage Help Program Fails to Live Up to Expectations

Strict Qualification Criteria Cited as Main Reason for Lack of Success

by Curtis White on October 3, 2011

The Emergency Homeowners’ Loan Program ends on October 7^th. The program was created with $1 billion in loans to be given to jobless homeowners. It is on pace to spend, at best, half of that amount as many who applied for loans are being turned away. Of the 100,000 to apply for help, less than 15,000 are expected actually receive any.

A spokesman for the Department of Housing said, “No one could have anticipated how difficult the statutory requirements make it to reach homeowners.” Originally part of the Dodd-Frank Wall Street bill in 2010, the program offered forgivable loans without interest to any homeowner who had lost at least 15 percent of their income due to economic conditions or medical disabilities.

Those who passed the approval process are expected to be given as much as $45,000. In order to get approved, homeowners needed to be at least 90-days past due on their mortgage payments, be under threat of foreclosure, and be able to prove that they could make payments if they found a new job.

Unfortunately, for money people, they were already too far behind on their payments or were somehow unable to meet the criteria. This was in large part due to a complex formula the Housing Department used to calculate housing payments, which used monthly payments, the individual’s amount of income, and arrears.

For many, the program also came too late. One requirement for entry into the program is that applicants must have lost their job no more than 12 months prior. However, many American homeowners have been out of work since the recession began in 2009, making them ineligible for relief through the program.

Rose Garcia, the executive director of a housing counseling company in New Mexico, has been disappointed by the program. According to Garcia, “This program could have made a difference to save people from being homeless, but it doesn’t meet people’s needs.”

With news in September indicating that the amount of foreclosures increased in August. Many bankers and other experts are viewing the statistic as a sign that banks are finishing paperwork and foreclosure proceedings for the backlog of properties which have been in foreclosure for extended periods of time.

Once again, Nevada has led the way in the amount of foreclosure filings per month. The state has been ranked highest on the list for the last 4.5 years.

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