Help for Homeowners Totals $3 Billion Under New Obama Plan

Help for homeowners is on its way - if you live in the right state.

Struggling homeowners in 17 states and the District of Columbia can breathe a little easier now that the Obama Administration has just approved additional financial support for two programs aimed at helping unemployed and underemployed people avoid foreclosure.

Two billion dollars of additional assistance will be released from the Housing Finance Agency (HFA) Innovation Fund for the Hardest Hit Housing Markets. the money will be aimed at states with above average unemployment rates (see chart below).

Assistant Secretary for Financial Stability Herb Allison says the money will go towards HFA programs for homeowners struggling to make their mortgage payments.

"This is part of the Administration's comprehensive housing policy that has helped to stabilize a fragile housing market and allows responsible homeowners the chance to reduce their monthly mortgage payments to affordable levels."

In addition to the HFA programs, the U.S. Department of Housing and Urban Development (HUD) will also release $1 billion to the Emergency Home Owners Loan Program that will provide bridge loans for up to $50,000 for homeowners in the hardest hit areas. These zero-percent interest, non-recourse, subordinate bridge loans can be used to pay the mortgage principal and interest, real estate property taxes, homeowners insurance premiums, and mortgage insurance premiums.

The HUD program is meant to build upon the HFA program by targeting more specific areas and families that need assistance. HUD Senior Advisor for Mortgage Finance Bill Agbar says the money released today will go towards stabilizing the flailing housing market.

"Together, these initiatives represent a combined $3 billion investment that will ultimately impact a broad group of struggling borrowers across the country and in doing so further contribute to the Administration's efforts to stabilize housing markets and communities across the country."

Help For Homeowners: Do You Qualify?

To qualify for financial help, homeowners must:

1. 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;
2. Have a mortgage property that is the principal residence of the borrower, and eligible borrowers may not own a second home;
3. Demonstrate a good payment record prior to the event that produced the reduction of income.

The real question is whether this latest addition to the foreclosure-prevention arsenal will work any better than the other HAMP programs already in place. What do you think? Is this money well spent?

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