Oct. 2, 2011 -- A $1 billion federal program to help financially strapped homeowners avoid foreclosure will help 10,000 to 15,000 people — not the 30,000 initially expected, a government official said Wednesday.
The Department of Housing and Urban Development, which is running the Emergency Homeowners' Loan Program, had until Friday to commit the $1 billion to homeowners in 32 states and Puerto Rico. If not committed, leftover money goes back to the U.S. Treasury.
HUD's main problem has to do with qualifying people, says HUD spokesman Lemar Wooley. About 75 percent of the rejections have occurred because people didn't meet criteria defined by the law, including that they be unemployed or underemployed due to economic or medical hardship, be facing foreclosure and be at least 90 days delinquent on their mortgage payment.
The most a homeowner could get is $50,000. If HUD approves 15,000 homeowners for the full amount, which is unlikely, $750 million would be spent. In Pennsylvania, one of the states to get the most money, average payouts are running $33,000, says Brian Hudson of the Pennsylvania Housing Finance Agency.
HUD says it's working with several senators to see if the deadline could be extended. HUD said last week that it wouldn't meet the 30,000 goal but was not more specific.
HUD is administering the program in 27 states. Five states, including Pennsylvania, already had such programs, so they ran their own.
Critics say that HUD was too slow to launch the program, failed to adequately advertise it, didn't give people enough time to apply and didn't make enough changes to get more people through in time. "HUD dragged its feet," says Rep. Barney Frank, D-Mass., who worked to get the funding.
The program was created in July last year with passage of Wall Street reform legislation. HUD start taking applications in June, six months after it initially planned, and extended the deadline twice to get more eligible applicants. The loans are to be 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 18 other states hurt most by unemployment or steep home price declines.
As of Wednesday, Pennsylvania had allocated $89 million for about 2,800 approved applicants. It expects to get its entire allocation, of $97 million for loans, committed by the deadline, Hudson says.
Only Texas and New York got more funding than Pennsylvania, a HUD press release shows. HUD administered the programs in Texas and New York.
Connecticut, which is running its program, has also committed all its funds, says Lisa Kidder of the Connecticut Housing Finance Authority. Pennsylvania and Connecticut started applications in April.
"With more time, we reached more people," Hudson says.