-- A $7.6 billion federal program to help homeowners avoid foreclosures had distributed about 1% of its money to distressed owners 16 months after its creation, government reports show.
The Obama administration awarded the funds last year to 18 states most affected by unemployment and fallen home prices. The states developed their own foreclosure-prevention programs targeting assistance to lower-income jobless and underemployed homeowners.
By June 30, 17 states had used the funds to help about 7,500 homeowners, show reports states filed to the Treasury Department. New Jersey, which began its program in May, started making loans only this month.
Funds are flowing more rapidly now, state officials say. All the states have launched their programs. The last was Illinois last week.
Overall, the Hardest Hit Fund is expected to help several hundred thousand homeowners. States have until 2017 to use their alloted funds.
"We are ramping up quickly now," says Di Richardson, head of the California program. Its program began in January; by June 30, it had funded 1,022 homeowners. That's now up to more than 2,000, and an additional 5,000 are close to getting aid, Richardson says.
Since President Obama announced the program in February 2010, banks have repossessed more than 1.5 million homes, says market researcher RealtyTrac. Millions more are at risk.
Officials in many states say it took longer than expected to develop systems for states to transfer funds and borrower data to mortgage servicers, who manage loans.
"That was more complicated than we thought it would be," says Cynthia Flaherty, head of Ohio's program, which includes 200 servicers. Ohio is now adding 500 borrowers to its program monthly, Flaherty says. Ten were added in December, its first month.
The program started with $1.5 billion for five states and was expanded to 18. Funds were most recently awarded in September 2010.
"You wish states could move quicker. But you also don't want them to waste the money," says Ira Rheingold, executive director of the National Association of Consumer Advocates. Andrea Risotto, Treasury spokeswoman, says the program required "considerable infrastructure."
The programs generally include temporary mortgage assistance from for six to 24 months.