Treasury Approves First-Round HFA Plans

housing finance agencies (HFAs) in Arizona, California, Florida, Michigan and Nevada can begin to use $1.5 billion in ‘Hardest Hit Fund’ foreclosure prevention funding under plans approved by the U.S. Treasury Department. The aid will support innovative local initiatives to assist struggling homeowners in those states, as part of the first round of funding available under this new program. The fund was established in February 2010 to provide targeted aid to families in the states hit hardest by the housing downturn. The five states approved as part of the first round of funding each experienced a 20% or greater decline in average housing prices. Each state HFA gathered public input and created Hardest Hit Fund programs designed to meet the unique challenges facing homeowners in their respective housing markets. The five HFAs submitted their Hardest Hit Fund proposals to the Treasury on April 16. The Treasury then reviewed each state's proposals to ensure compliance with the Emergency Economic Stabilization Act (EESA) and offered technical assistance to develop performance and reporting metrics. Approved states will now begin to set up and roll out their Hardest Hit Fund programs, with specific implementation timing depending on the types of programs offered, specific state-level procurement procedures, and other factors, the Treasury says. The proposals include programs to assist struggling homeowners with negative equity through principal reduction; assist the unemployed or under-employed in making their mortgage payments; facilitate the settlement of second liens; facilitate short sales and/or deeds-in-lieu of foreclosure; and assist in the payment of arrearages. The following is a state-by-state summary of the Hardest Hit Fund proposals approved by the Treasury: [list][b]Arizona[/b] (which was approved for $125.1 million) will provide assistance in the form of principal reduction, interest-rate reduction and/or term-extension programs with the goal of allowing borrowers to enter into a permanent modification program. In circumstances where a second lien is prohibiting modification of a first lien, the state will provide assistance toward elimination of the second lien. The state will also offer assistance to the under-employed while they seek new employment. This assistance may be used to pay monthly mortgage payments or remove second mortgages where that second lien is prohibiting the modification of a first lien.*[b]California[/b] ($699.6 million) will provide assistance to reduce principal with earned principal forgiveness. The state will also target funds to address delinquent loan arrearages and offer a mortgage payment subsidy to unemployed families. California will additionally provide relocation assistance funding to families that have executed a short sale or deed-in-lieu.*[b]Florida[/b] ($418 million) will offer payment assistance to the unemployed and under-employed while they seek re-employment. The state will also offer principal reduction or second-lien extinguishment, if necessary, to achieve a mortgage modification.*[b]Michigan[/b] ($154.5 million) will subsidize an unemployed borrower's mortgage payments while they search for employment and assist with loan arrearages for those who can sustain homeownership and have undergone a financial hardship. The state will assist homeowners with negative equity through earned principal forgiveness.*[b]Nevada[/b] ($102.8 million) will create a mortgage modification program using a combination of forgiveness and forbearance, with a goal of reducing principal to less than 115% of loan-to-value and lowering payments to 31% of debt-to-income. The state will also offer assistance to reduce/eliminate second liens with earned forgiveness over a three-year term. Additionally, the state will provide allowances for appraisal and transaction fees, moving fees, a legal allowance for up to three months, and a combination of incentives for borrowers and servicers to facilitate short sales.[/list] In March, the Obama administration announced a second round of Hardest Hit Fund aid totaling $600 million for five additional states with high areas of concentrated unemployment: North Carolina, Ohio, Oregon, Rhode Island and South Carolina. The proposals that these states submitted are currently being reviewed. SOURCE: [link=]U.S. Treasury Department


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