Fed programs can not keep up with foreclosures

Florida’s foreclosure epidemic continues to haunt the state, but federal programs designed to keep people in their homes are having a hard time trickling down to distressed homeowners.

After a lull resulting from the “robo-signing” controversy last fall, Florida’s foreclosure rate is picking back up, leaving courts jammed with cases. For the third quarter alone, the state’s 67,886 foreclosure filings were second in the nation.

The Hardest Hit Fund is a state-run program funded by the U.S. Treasury, designed to help underemployed or unemployed workers make their mortgage payments until they find work again. As of Oct. 14, the Florida Housing Finance Corporation, the state agency administering the program, has approved just 3,572 (11.7 percent) of the 30,640 applications it has received from Florida homeowners.

“When the Treasury Department set up the program they asked for a targeted unemployment program and that’s what we did,” FHFC spokeswoman Cecka Green said.

The Sunshine State was awarded $1 billion under the program, and after a pilot program was launched in Lee County last year, the FHFC began a statewide rollout in April.

Because the program was designed only to help homeowners struggling to keep up with their mortgage because of unemployment, many distressed properties in Florida do not qualify for the program. Of the total applications received by FHFC, about one-third were incomplete, and of the 11,841 applications that have been reviewed, 8,197 – nearly 70 percent – were ineligible.

Under the program, a homeowner is given a no-interest loan to pay monthly mortgage bills. The maximum available under the plan is $18,000 over six months. When an application is deemed successful, the full $18,000 is allocated to the borrower, although any unused dollars are funneled back into the fund if a homeowner finds employment before the end of the six months. Borrowers must also make a monthly payment of between $70 and 25 percent of the payment.

As of Oct. 14, $64.3 million has been allocated to homeowners under the program, although it is unclear how much has actually gone to the borrowers. Through June 30, the latest date for which concrete data is available, a little more than $1 million has been dispersed through the program. Green said more updated figures will be ready this week.

The weak recovery of the economy following the deep recession is threatening to undercut the very reason for the program. Workers are remaining unemployed for longer spells as jobs remain hard to come by, which means even the few getting help from the program may not regain employment in six months, plunging them back into the danger of foreclosure and merely prolonging the negative impact on the housing market.

In the Lee County pilot program, which began in October 2010, before Gov. Rick Scott was elected, homeowners were to be given up to $35,000 worth of assistance for up to 18 months, with no monthly payment required. The statewide program was slated to begin in February, but after taking office, Scott sought changes to the program.

“Many more homeowners could be helped under these changes,” Scott spokeswoman Jackie Schutz said. “This program is supposed to be temporary.”

Green estimated that the new parameters would double the amount of people who could be helped by the program from 20,000 to 40,000. But the changes also cut down the amount of time an unemployed homeowner has to get back into the workforce.

To qualify, a homeowner must be a Florida resident using the home as a primary residence, must be unemployed or underemployed through no fault of their own, have a household income at or below 140 percent of the local median income, cannot have a pending bankruptcy or have a mortgage-related felony in the past 10 years. The loan must also have been rendered before Jan. 1, 2009, the principle must be less than $400,000, the loan must not be more than 180 days past due and must be from a mortgage company participating in the program.

The requirements also rule out a number of homeowners with distressed properties, including those who are current on their mortgage payments but are underwater – they owe more than their home is worth.

As a way of helping those homeowners, Green pointed to an expansion of a separate federal mortgage mediation program, announced by President Barack Obama last week, which allows more homeowners with mortgages backed by Fannie Mae and Freddie Mac to qualify for loan adjustments.

But other federal foreclosure prevention programs have not had the intended effect on the housing market. Obama’s original Home Affordable Modification Program, or HAMP, spent just $2.4 billion of the $50 billion allocated to it and helped just 1.7 million of the 9 million people it was designed to aid.