March 29, 2020

Emergency Homeowners Aid Ending With Up to $500 Million Unspent

But the program is now ending after achieving lackluster results and stirring widespread recrimination.

Fewer than 15,000 households are expected to receive help despite enormous demand, and perhaps half of the money will go unspent.

The department attributed the program’s performance to the way it was set up by Congress. But Representative Barney Frank, Democrat of Massachusetts, an author of the legislation, said the program’s failings were a result of poor administration and the department’s late start in rolling it out.

“They dragged and dragged their feet,” Mr. Frank said in an interview. “I believe it was not one of their priorities.”

The program, called the Emergency Homeowners’ Loan Program, or EHLP, was signed into law in July 2010 as part of the Wall Street Reform and Consumer Protection Act. It offered people who were unemployed or underemployed up to $50,000 in zero-interest loans to pay their mortgage debts. HUD has until Friday to mete out the funds or lose the balance.

Yet the department did not begin the program until this June, and set an original application cutoff date of late July. Across the country, nonprofit housing groups and mortgage counselors who had been chosen to work with applicants rushed to meet the deadline, which ended up being extended several times.

The counselors also found the eligibility criteria complicated and overly restrictive.

Under the stipulations, applicants had to be at least 90 days behind on their mortgage payments. They also had to be earning at least 15 percent less than their 2009 income due to unemployment, underemployment or serious illness. The program subsidized mortgage payments for up to two years. But if the cost of the subsidies and the repayment of a homeowner’s mortgage debt exceeded $50,000, the applicant would be ineligible.

The combination of these rules, housing counselors said, disqualified a large number of people who had gone through their savings and fallen behind on mortgage payments. Nor have all of the applicants who met the qualifications been approved for the loan.

And with the Friday deadline, the clock is ticking.

At the Twin Cities Community Development Corporation of Fitchburg and Leominster, Mass., 31 of the 250 applicants who sought help met the program’s requirements, and by Wednesday, six had been approved.

The National Community Reinvestment Coalition, in Washington, took applications from 506 people. Of those, 49 met the eligibility guidelines, and 26 had been approved as of Wednesday.

Operation Hope, a nonprofit based in California, fielded queries from 1,200 people seeking help; of those, 25 were found to be qualified, and by Wednesday, five had been approved.

“It’s been a very discouraging process,” said Laurel Miller, director of homeownership at the Twin Cities agency. “It was almost like in order to qualify for this, it had to be the perfect storm.”

In states where housing costs are high, like New York, bitterness about the program was compounded by the fact that many homeowners were deeper in arrears than the program allowed. Of the 1,000 people who sought help through the nonprofit Neighborhood Housing Services of New York City, only 74 qualified.

“It’s been a frustrating program,” said Bernell K. Grier, chief executive of the organization. “We wish we could have done more.”

HUD officials cited many reasons for the program’s slow rollout, saying the agency had to build the infrastructure to do direct lending, hire organizations to put the program into effect and create regulations for its operation.

Housing officials also said that nearly all of the eligibility guidelines came from a 1975 act through which the new money had been appropriated, and that they had interpreted the guidelines accordingly, leading to restrictions like the one involving the 15 percent income drop.

“No one could have anticipated how difficult the statutory requirements would make it to qualify homeowners, causing us to overestimate the number of people who could meet the eligibility criteria,” said Todd M. Richardson, director of the emergency loan program.

Yet Representative Frank said he never heard the agency complain about the statue guidelines’ being overly stringent. “They’re just trying to cover up their embarrassment,” he said.

John Dodds, director of the Philadelphia Unemployment Project, which also processed applications, said the agency could have been nimbler, modeling its program on an existing one rather than creating its own and eliminating stringent requirements, when it became clear that hundreds of millions of dollars would not be spent.

Housing counselors had also been pushing to secure money for people who met the program’s qualifications yet might not be approved by Friday. Last week, Senator Bob Casey, Democrat of Pennsylvania, introduced a bill to extend the deadline, but it was not voted on.

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White House Seeks More Use of Home Refinancing Program

WASHINGTON — The Obama administration is seeking to broaden access to a two-year-old refinancing program that has helped far fewer homeowners take advantage of low interest rates than initially expected.

President Obama announced the effort Thursday night as part of his package of measures to spur job creation, saying it would help “responsible homeowners” by reducing their monthly mortgage payments, and bolster the economy as they spent the money on other things instead.

“I know you guys must be for this,” Mr. Obama told a joint session of Congress, “because that’s a step that can put more than $2,000 a year in a family’s pocket, and give a lift to an economy still burdened by the drop in housing prices.”

The Home Affordable Refinance Program was set up to help homeowners who cannot qualify for loans from private companies. The government-owned companies Fannie Mae and Freddie Mac agreed to offer loans at lower rates to borrowers with mortgage debts up to 125 percent of the value of their homes.

The administration had predicted that millions of homeowners would benefit, but through the end of June, the companies refinanced only 838,000 mortgages. Falling home values reduced the numbers of eligible borrowers. So did strict income requirements that excluded people even if they had never missed a mortgage payment. And large fees exceeded the potential available savings in some cases.

Administration officials said Friday that they were examining a range of issues and hoped to complete new guidelines in the next few weeks.

Economists, including the Federal Reserve chairman, Ben S. Bernanke, see the poor housing market as a crucial reason the economy is not growing faster. Business interests and consumer advocates have pressed the White House for grand plans, arguing that the economy will not fully recover as long as the housing market is depressed.

But some of the president’s key advisers worry that efforts to aid struggling homeowners will infuriate people who do not need help, and the memory remains fresh in Washington that the Tea Party movement began as an angry response to a mortgage aid program.

The modest proposal this week to expand the refinancing program emerged from months of deliberations. Just two sentences about it were included in the speech after an internal debate, and Mr. Obama was careful to say that the plan was aimed at “responsible homeowners.”

He also proposed investing $15 billion to rehabilitate vacant and foreclosed properties, creating construction jobs and helping to refresh blighted neighborhoods.

While most of Mr. Obama’s stimulus plan requires the consent of Congressional Republicans, expanding the refinancing program must instead be negotiated with the Federal Housing Finance Agency, the independent guardian of Fannie and Freddie.

The agency is charged with limiting losses at the two companies, which fall to taxpayers, and it has resisted some ideas that could increase those losses.

But Edward J. DeMarco, the agency’s acting director, said Friday in a statement that he shared the administration’s desire to expand the program because broadening eligibility might benefit both homeowners and the companies, by limiting defaults.

“The final outcome of this review remains uncertain, but F.H.F.A. believes this undertaking is worthwhile and consistent without our conservator responsibilities,” Mr. DeMarco said.

The financial implications depend on the particulars. In a recent paper, however, the Congressional Budget Office said Fannie and Freddie could refinance an additional 2.9 million loans without significantly increasing taxpayers’ liability.

The office calculated that such a program would save homeowners about $7.4 billion in the first year and help about 111,000 of those homeowners avoid default. It said the cost to the government would be about $600 million, because the loss of revenues from future interest payments on the refinanced loans would exceed the savings from reducing defaults.

Louise Story contributed reporting.

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