-- A $1 billion federal program to help financially strapped homeowners avoid foreclosure will not meet its goal of helping 30,000 homeowners, a government official said Tuesday.
The Emergency Homeowners' Loan Program, run by the Department of Housing and Urban Development, has until Sept. 30 to commit the $1 billion to homeowners in 32 states and Puerto Rico. Uncommitted funds will go back to the U.S. Treasury.
HUD spokesman Brian Sullivan said Tuesday that the agency — and state and local housing groups — are "working feverishly" to get applicants through the pipeline in time, but "we now believe we will not meet that ambitious goal."
The federal application deadline passed Sept. 15, after two extensions to seek more eligible applicants. Sullivan couldn't say how many people HUD expects to get funded. He also couldn't say how many people have been approved so far.
HUD estimates that about 100,000 people nationwide filled out initial applications, but more than expected failed to meet eligibility requirements. Others didn't provide all the needed documentation.
Initially, HUD's concern was that too many people would qualify and that a lottery would be needed.
HUD is already facing criticism for its handling of the program. "They kept delaying the start date" from late last year to mid-June, when they started taking applications, says Lew Finfer of the Massachusetts Communities Action Network. That left "inadequate time" for people to learn about the program and apply, he says.
HUD says it took time to allocate funds to the states and get housing agencies on board to help find and screen applicants.
HUD is administering the program for 27 states, and five states are doing their own.
One is Pennsylvania. It has approved 1,800 people — with 2,000 in process — and allocated $64 million of the $96 million it has available for loans, says Brian Hudson, of the Pennsylvania Housing Finance Agency.
To qualify for a forgivable, no-interest loan of up to $50,000, applicants had to have at least a 15% hit to income due to the economic crisis or a medical condition and be at least 90 days late on their mortgage on June 1.
Those and other requirements were "too cumbersome," says Carol Finegan of the Brooklyn Housing & Family Services agency.
Of 600 people who expressed interest in the program at that agency, 35 met all of the requirements, she says. About 180 failed to submit all documents.
The purpose of the program is to give unemployed, or underemployed, homeowners temporary help to weather their financial hardships and avoid foreclosure. The loans are to be gradually forgiven if homeowners keep their homes for five years.
The program complements the Obama administration's Hardest Hit Fund, a $7.6 billion mortgage assistance program for the 18 other states that were hurt most by unemployment or steep home price declines.
At the end of June, those states — including California and Florida — had distributed less than 1% of their Hardest Hit Funds to homeowners.