Act Fast for Mortgage Bail-Out

Last Updated Jul 21, 2011 8:10 PM EDT

Consumer advocates are famous for saying that if an offer seems too good to be true, it is and you should avoid it. Just this once, ignore that advice.

If you're a homeowner struggling to make mortgage payments because you are unemployed or underemployed, the federal government has just launched a program to help. The Emergency Homeowner Loan Program, or EHLP, will provide zero-interest loans of up to $50,000 to pay your mortgage, property tax and insurance bills for up to two years.

The program will essentially subsidize your mortgage payments, allowing you to pay just 31% of your income or $150, whichever is greater. EHLP will pay the balance. Homeowners can receive this help for up to 24 months, or until they run through the maximum EHLP loan amount of $50,000.

No payments are due on the 5-year term of these loans as long as the borrower continues to meet the program requirements. Better yet, if you do meet all the conditions of the program, your loan will be forgiven in 20% increments each year, essentially turning the loan into grant over five years.

But you've got to act fast. Homeowners only have until July 22, 2011 to submit pre-screening applications for this money. There is $1 billion available. When the money is spent, the program is over, says Ruth Susswein, deputy director for national priorities at Consumer Action.

"Because this is being done in such a rush and the offer is so good, it seems like you're hitting every warning sign that this is a scam," Susswein said. "But in this rare case, it happens to be true. There is help out there. But you have to act fast to get it."

The just-launched Emergency Homeowner Loan Program is just the latest in a series of government programs aimed at easing the national housing crisis that left roughly 10% of the nation's homeowners struggling to make mortgage payments. Where previous programs offered to "modify" loans for those who had been subjected to deceptive predatory loans, help was needed for homeowners who had simply lost jobs and were struggling to make ends meet, Susswein says.

Last year, the government moved to provide about $2 billion in help to homeowners in states that had been hardest hit by unemployment and sliding home prices, including Arizona, California, Florida, Michigan and Nevada. However, homeowners in the states that didn't qualify for these "hardest-hit" funds were left high and dry. EHLP was designed to fill the gap by providing funds for homeowners in the remaining 32 states, she says.

Who qualifies
To qualify for the EHLP program you must live in one of the 32 states affected by the program and have experienced at least a 15% decline in income due to a job loss or serious illness, leaving you at risk of losing your home.

Those 32 states are: Alaska, Arkansas,Colorado, connecticut, Delaware, Hawaii, Idaho, Iowa, Kansas, Louisiana, Maine, Maryland, Massachusetts, Minnesota, Missouri, Montana, Nebraska, New Hampshire, New Mexico, New York, North Dakota, Oklahoma, Pennsylvania, Puerto rico, South Dakota, Texas, Utah, Vermont Virginia, Washington, West Virginia, Wisconsin and Wyoming.

If you are at risk of losing your home, but live in a state that doesn't qualify for EHLP, you may still be able to get help, but it would be through a different program. (More on that below.)

What you should do now
If you are in one the 32 states that qualify for the EHLP program, go to or call 855-346-3345. Be patient. The website appears to be overwhelmed, so it's loading exceptionally slowly. When I called the phone line earlier today, the phone operators were also "helping other customers."

The best time to get through to the web site may well be in the middle of the night or very early in the morning. (By the way, be careful of typos in the web address. The above link will get you to a site offered by NeighborWorks America. If you mistype the address as "findhelp," you'll get a commercial site that is not affiliated with this program.)

If your state is not listed here, it's likely among the "hardest-hit" states and offers help through the hardest-hit program, which is operated on a state-by-state basis. You can find your state's hardest-hit program here.
You will need to fill out the relevant applications and gather documents, including recent mortgage statements; a written notice from your employer, showing your termination or cut in pay; a notice from your lender, saying you're at risk of foreclosure; tax returns for the past two years; citizenship documents (such as a passport or birth certificate); and documentation of current income, such as a pay stub.

Hurry. And good luck.

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