The Obama Administration will direct an additional $3 billion in assistance to homeowners facing foreclosure due to lost income, an effort it announced Wednesday to help some of the more than 14 million Americans counted as unemployed. The assistance plan has two components:
• $2 billion more for existing programs. Money under the government’s Hardest Hit Fund will go to Housing Finance Agency programs in 17 states and the District of Columbia that aid homeowners struggling to pay their mortgage because of unemployment. Those states and the district all had unemployment rates at or above the national average the past 12 months.
Each state will use the funds to provide temporary assistance to homeowners to help them pay their mortgage while they seek re-employment, additional employment or receive job training.
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States may provide various kinds of help, including mortgage modifications, assistance with short sales (where a home is sold for less than is owed on the mortgage) or pay financial institutions incentives to write down a portion of a borrower’s principal balance.
The Hardest Hit Fund has previously provided $2.1 billion to these programs in two earlier rounds of funding.
• $1 billion for a new federal emergency loan program. The Department of Housing and Urban Development will provide assistance — for up to 24 months — to homeowners who are at risk of foreclosure and whose income has been substantially reduced due to involuntary unemployment, underemployment, or a medical condition.
The loans would be directed to states or cities that have high unemployment, but those are still being determined. Eligible borrowers could receive up to $50,000 in emergency loans. Funds would be distributed through state agencies and non-profit groups.
To qualify, homeowners would have to 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.