HUD Provides $1 Billion of Emergency Loans to Homeowners, T&I Default Solution?

The Obama Administration announced additional support to help homeowners struggling with unemployment through two targeted foreclosure prevention programs on Wednesday. The U.S. Department of the Treasury will make $2 billion of additional assistance available for homeowners struggling to make their mortgage payments due to unemployment.

“We remain committed to helping struggling homeowners, and this program will provide additional assistance to states hit hardest by unemployment,” said Assistant Secretary for Financial Stability Herb Allison. “This is part of the Administration’s comprehensive housing policy that has helped to stabilize a fragile housing market and allows responsible homeowners the chance to reduce their monthly mortgage payments to affordable levels.”

Additionally, the Department of Housing and Urban Development (HUD) will soon launch a complementary $1 billion Emergency Homeowners Loan Program to provide assistance to homeowners who are at risk of foreclosure and have experienced a substantial reduction in income due to involuntary unemployment, underemployment, or a medical condition.

“HUD’s new Emergency Homeowner Loan Program will build on Treasury’s Hardest Hit initiative by targeting assistance to struggling unemployed homeowners in other hard hit areas to help them avoid preventable foreclosures,” said Bill Apgar, HUD Senior Advisor for Mortgage Finance. “Together, these initiatives represent a combined $3 billion investment that will ultimately impact a broad group of struggling borrowers across the country and in doing so further contribute to the Administration’s efforts to stabilize housing markets and communities across the country.”

HUD’s emergency homeowners loan program will work through a variety of state and non-profit entities. The loans will be a deferred payment “bridge loan” (zero percent interest, non-recourse, subordinate loan) for up to $50,000 to assist eligible borrowers with payments on their mortgage principal, interest, mortgage insurance, taxes and hazard insurance for up to 24 months.

The program could be an asset to seniors who have been unable to pay their tax and insurance obligations on their reverse mortgage.  While there is no official number as to how many HECM borrowers are currently in T&I default, it continues to be a concern for lenders and servicers in the reverse mortgage industry.  Whether or not the program will be available to HECM borrowers isn’t yet clear.

“It is too early to answer that question because we are still in the process of defining the program requirements,” said Lemar Wooley, spokesperson for HUD in an email to RMD.  The agency plans to announce additional details, including the targeted communities and other program specifics in the coming weeks.

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