'Hardest Hit Fund' to Help Troubled Homeowners in 10 States


Homeowners in the most heavily real estate-slumping states now have programs they can tap or will soon be able to tap thanks to the Obama administration's Hardest Hit Fund. The first five states to get money were Arizona, California, Florida, Michigan and Nevada, because they experienced a 209 percent or greater decline in average home price.

Five more states were added because of their high levels of unemployment. They are North Carolina, Ohio, Oregon, Rhode Island and South Carolina.

How the funds will be used is decided by each state's Housing Finance Agency. Here's a state-by-state summary of the help available, along with links to their HFAs for more information:

Arizona


Arizona does not yet have it's program in operation but plans to offer permanent modifications that could include a principal reduction, rate decrease and/or term extension to achieve a monthly payment that does not exceed 31 percent of the homeowner's monthly income. For a principal reduction, the principal balance must exceed 120 percent of present market value of the home. The homeowner could qualify for a maximum contribution of $50,000 that is matched by the lender and forgiven over time. A rate reduction could be to the current market rate. Arizona also plans assistance to remove second mortgages when necessary to modify terms of a primary loan, "only if it is part of the purchase mortgage and required for modification of primary mortgage."

Also being planned is assistance to prepay a portion of mortgage loan payments for a predetermined amount of time while you seek employment. Another program could offer loans to homeowners that are forgiven over time (earned forgiveness) as an incentive to keep them in their homes. For program updates go to the Arizona HFA website.

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California


California is now taking applications for its Keep Your Home Programs, which won't start until Nov. 1, 2010. Programs that will be available include:
  • Unemployment Mortgage Assistance, with a $9,000 cap for six months at $1,500 per month.
  • Mortgage Reinstatement Assistance of up to $15,000.
  • A Principal Reduction Program with a benefit cap of $50,000.
  • A Transition Assistance Program offering up to $5,000.

    In addition to help for current homeowners, California offers help for low-income homebuyers. Low income is determined county-by-county. For example in Los Angeles County you're income can't be higher than $111,020 per year. If you qualify, you can get a fixed-rate 30-year mortgage insured by the Federal Housing Administration at below-market rates. You can get a mortgage loan of up to $417,000, but must complete a homebuyer education program and have a FICO score of at least 620. You may also be eligible to apply for the California Homebuyer's Downpayment Assistance Program, which means you could get up to 3 percent of the purchase price of the home for down-payment or closing-cost assistance.

To get help contact a HUD foreclosure avoidance counselor for California.


Florida

Florida is still in the process of getting approval for its plans and expects to have more information by the end of September. It has a total of $656.8 million available and will provide help for troubled homeowners facing foreclosure. Florida anticipates that it will be able to help 20,000 homeowners, once the program is approved, with help available for up to 18 months. Money can be used to bring a mortgage current and to help homeowners pay a mortgage while they seek employment or undertake job training.

Until Florida gets its act together, you should contact a HUD counselor for Florida.


Michigan

Michigan is operating its program through participating lenders, so in Michigan you need to contact your lender. Its assistance includes:
  • Mortgage payment assistance for homeowners currently receiving unemployment compensation.
  • Rescue funds for homeowners who have fallen behind in their mortgage payments due to no fault of their own (and who have overcome this obstacle).
  • Principal reductions, through federal matching funds, for homeowners who can no longer afford their mortgage payments as a result of reduced income.

If your lender is not participating or not cooperating, contact a homeownership counselor in Michigan.


Nevada

Beginning sometime this fall, Nevada will have programs available for troubled homeowners, including principal reduction, second mortgage reduction and short sale acceleration. Nevada expects to be able to help 2,500 Nevada families stay in their homes with a permanent change to their mortgages via principal reductions of up to $50,000, with a proposed minimum of 50 percent of the reduction coming from the note holder. You could be eligible for this program if you are underemployed or income restricted.

The Second Mortgage Reduction plan is aimed at assisting borrowers who have a second lien interfering with either a short sale or modification of the first mortgage. You could be eligible for this program if you are unemployed and underemployed. This could be combined with the short sale acceleration program.

You can find the organizations slated to help Nevada homeowners at the Nevada Affordable Housing Assistance website.


North Carolina

The North Carolina Home Protection Program helps the unemployed who lost their jobs because of changing economic conditions, such as a plant closing. You can get HPP help to pay your mortgage while you look for a job or train for a new one. You'll also be eligible for counseling to help you understand your options and plan you next steps.

First, you can qualify to receive a loan of up to $24,000 at zero interest. The HPP funds will be used to pay your mortgage and related expenses, such as property insurance, homeowner dues and property taxes for up to 24 months. No repayment is needed for 15 years, unless your home is sold, refinanced or is no longer your principal residence. You can use the HPP's help as: one-time assistance to bring your mortgage current; short-term assistance while you look for a job; or long-term assistance while you participate in an approved retraining program.


Ohio

Ohio will launch its program on Sept. 27, but if you need immediate help you can visit the Save the Dream Ohio website or call 888-404-4674 to get assistance from a housing counselor. When the program is fully operational, its options will include:
  • Rescue Payment Assistance to help bring your mortgage current. The payment to your mortgage servicer could cover principal, interest, fees, delinquent taxes or escrow shortage, and homeowners' insurance.
  • Partial Mortgage Payment Assistance for unemployed homeowners while they search for a job or participate in job training. Modification Assistance With Principal Reduction, to reduce your mortgage principal to the level necessary to achieve a loan modification -- with a target of a 115 percent loan-to–value ratio or less.
  • Transitional Assistance to offer incentives to servicers to complete short sales and deed-in-lieu agreements, and to help homeowners exit their homes gracefully.

If you use one of these programs to stay in your home and then sell or refinance the home within five years, the assistance you receive will be repayable from the net proceeds.


Oregon and Rhode Island have not yet designed their programs. For updates on future programs go to Oregon's homeowner help website and Rhode Island Housing. South Carolina also does not expect to have anything ready until October and recommends that you contact a housing counselor for immediate assistance.

Lita Epstein has written more than 25 books including "The 250 Questions You Should Ask to Avoid Foreclosure."


For more government programs to assist homeowners see this AOL Real Estate guide:
Home Improvement Grants Give Homeowners a Boost.


More on AOL Real Estate:
Find out how to calculate mortgage payments.
Find homes for sale in your area.
Find foreclosures in your area.
Get property tax help from our experts.


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