The federal government’s signature program to help homeowners from falling behind on their mortgage, having utilities shut off, or being forced out of their homes, is finally being rolled out across America through pilot programs.
But servicers say that dealing with the $10 billion fund, dubbed the “Homeownership Assistance Fund,” has been chaotic and cumbersome. Industry trade groups, which played a key role in getting the program off the ground in March 2021, described the process as “an enormous collaborative effort,” but also as a “complicated thing to process.”
Still, they say rollout of HAF has been a qualified success – for all the logistical headaches, the financial assistance is helping borrowers stay in their homes. HousingWire spoke to servicers to gain insight into how the rollout was going for industry players.
HAF program an ‘enormous burden’
The HAF program, run by the Department of Treasury, was designed to give states significant leeway in how they use the federal money. That’s precisely what makes it so complex and problematic.
“My favorite tagline when discussing HAF is ‘50 states, 50 programs,’” said Courtney Thompson, chief product officer at Sagent. “I think the rationale of the Treasury is that states experienced delinquency and the impact from COVID-19 differently, so they wanted to give the states the flexibility.”
Thompson said the flexibility baked into HAF has been an “enormous burden on servicers’ ‘ and has weighed on servicers’ loss mitigation profits and assessments. Servicers, by law, are required to communicate clearly with borrowers about available options. But because the programs vary, that can be a challenge.
“The consumer is always instructed to call the servicer and the servicer is responsible, under penalty of unfair, deceptive, or abusive acts or practices (UDAAP) to communicate clearly to the consumer and without confusion,” Thompson said. “In this instance, the servicer has its own loss mitigation programs that the consumer can apply for, and in the wake of COVID-19, there are more programs and more opportunities for assistance and then you have HAF that a borrower can potentially apply for.”
Servicers and stakeholders working with the HAF program say states differ not only in logistics, such as how many employees are tasked with running the program, but also in each state’s requirements for HAF applicants. Some states require little in the way of documentation, while others require borrowers to provide detailed information about their finances. An important caveat: Borrowers must apply for HAF themselves.
Kimberly Hare, president of Fay Servicing, said many state administrators are “confused” about how to run their programs, which has resulted in more work for servicers.
“States were given money and they weren’t told how to handle the distribution,” Hare said. “A lot of them are running behind and don’t have the people necessary to work the programs, and we are having to repeat sending documents because they get lost. It’s twice as much work sending data back and forth.”
Gisele Roget, who heads Washington, D.C.-based public affairs firm Overbrook Square Group, said another challenge for servicers is being mindful of guidance surrounding the loans that they service.
“I think one of the key nuances is that servicers must also follow guidance published by the Federal Housing Administration, the Federal Housing Finance Agency, the Department of Veterans Affairs and the Department of Agriculture,” Roget said. “Servicers that participate in these programs ought to be in compliance with all of the applicable guidance.”
Hare said there seems to be an “education gap” among states regarding which borrowers should qualify for funding.
“Instead of focusing on borrowers that were impacted during the pandemic, some of the states have not limited that and are allowing borrowers who were delinquent way prior to the pandemic,” Hare said.
Although the fund was created specifically to help homeowners affected by the pandemic, the Treasury allows homeowners experiencing financial hardships after Jan. 21, 2020, to apply for government assistance.
Stakeholders who work with the HAF program said this guidance was crafted under the assumption that the pandemic may have compounded or further exacerbated the financial situation of some already struggling homeowners.
The tail end
Trade groups helping states and servicers maneuver HAF remain optimistic about the program’s future.
The National Council of State Housing Agencies, an advocacy organization for state housing agencies, said so far servicer participation “has been very strong,” and many states have worked out the kinks to the benefit of homeowners.
“States have been working as hard as they can and as diligently as they can to design programs and get their plans approved by the Treasury, so that they can start helping homeowners,” said Greg Zagorski, senior homeownership specialist at the NCSHA.
Representatives of the Housing Policy Council, which has worked to set up the HAF program, said they are encouraged by states from which money is being disseminated to borrowers in need.
The HAF “is at the tail end of loss mitigation and loss mitigation work,” a HPC spokesperson said. “The fund will fill in holes at the end.”
It wasn’t immediately clear how much money has been allocated or distributed from HAF programs. Zagorski said the Treasury will publish a first quarter report this summer, and the second quarter report is expected to be published Aug. 15.
In recent months, housing agencies have upped their rhetoric about the program.
Secretaries from HUD, VA, USDA and Treasury in a joint statement published in May said servicers of federally backed mortgages should offer HAF funding as a loss mitigation option to borrowers who are struggling to make their mortgage payments.
Agency representatives said they encourage homeowners and servicers to continue working together on loss mitigation options to ensure available sources are fully utilized.
The multi-agency press release also asked servicers to hit the pause button on foreclosure proceedings if a borrower applies for assistance through the HAF.
“Pausing any pending proceedings is a vital step toward keeping families in their homes as they receive assistance through the HAF program,” the statement read.
The Consumer Financial Protection Bureau also issued a warning in March that it will heavily scrutinize complaints from borrowers who claim they weren’t given the option to apply for the HAF.
The watchdog said servicers should provide borrowers with sufficient time to move through the HAF application process before moving forward with foreclosures. Cases in which a homeowner is foreclosed upon while a HAF application is pending will “merit increased scrutiny.”
“The servicing community has done a fantastic job keeping up with the velocity of change during this time period,” Thompson said. “And ultimately, because the federal investors and insurers have now been very, very clear from a rulemaking perspective that consumers have to be offered HAF prior to foreclosure processes, that makes me think everything is going to be fine.”
She added: “This is what I call a ‘three little birds moment,’ where there’s been all this noise and there’s been all this work to keep up to get to a place, but at the end of day, because there is some consistency now in the expectation that HAF is a thing that needs to be paid attention to every little thing will be alright from a consumer perspective.”