Thousands of potentially eligible homeowners may be left out of a $1 billion Department of Housing and Urban Development program that provides interest-free loans to the unemployed because of documentation and timing problems.

The Dodd-Frank Act required HUD to develop the Emergency Homeowners Loan Program. Unemployed borrowers in 27 states could apply through nonprofit counseling centers for up to $50,000 in mortgage assistance so long as they contribute $150 per month.

HUD initially targeted 30,000 borrowers with the program. The deadline for all but five states already running similar programs expired Sept. 15 after two extensions. The deadline expires Sept. 30 for the others: Pennsylvania, Connecticut, Delaware, Idaho and Maryland.

A HUD spokesman said 75% of the rejections so far were made because borrowers did not meet the criteria required by the program's statute.

"The main problems we are having are based to the statutory requirements of the program and the statutory time limits," the spokesman said. "We are supporting efforts by several senators to extend the program to allow us to reach as many homeowners as possible."

Sen. Robert Casey (D-Pa.) introduced a bill Friday that would extend the program out further. The bill was co-sponsored by senators Charles Schumer (D-N.Y.) and Jeanne Shaheen (D-N.H.).

The HUD spokesman said if there were more time, more applications could be re-opened.

"Even with the limitations, we have been able to extend the application deadline, allow more deeply distressed borrowers in even though they would reach the maximum in assistance well before 24 months, recalculated ‘pre-event income’ to allow more families to show they’ve had a substantial loss of income, and created a hardship waiver for families who are unable to make the minimum contribution to their monthly mortgage costs," the HUD spokesman said of the administrative adjustments they've made.

But John Dodds, director of the Philadelphia Unemployment Project, criticized HUD for not launching the program until this spring, eight months after Dodd-Frank passed. Dodds said many borrowers are being denied because of the overly restrictive requirements and that there wasn't enough time to even process what went through. One nonprofit, he said, got 26 applications approved out of 2,200 received.

"There are large numbers of applications out at the counseling agencies that are not going to be dealt with by Sept. 30," Dodds said. "They started late and became overloaded with paperwork. "

Getting any sort of extension for a government-spending program through legislation remains a far-distant possibility as Congress searches for trillions in spending cuts and works at cutting down the long-term U.S. debt. Lawmakers are struggling to reach an agreement on how to fund the Federal Emergency Management Agency at the last minute and avoid a government shut down.

The roughly $100 million set aside for Pennsylvania has already been allocated, Dodds said. But his organization met with HUD Secretary Shaun Donovan Monday to ask for the entire $1 billion to be encumbered to all state housing finance agencies. According to Dodds, Donovan denied the request, citing that the funding couldn't obligated if the applicants weren't approved.

It is unknown how much of the $1 billion will go unspent because of the difficulties.

"They didn't say," Dodds said.

Write to Jon Prior.

Follow him on Twitter @JonAPrior.