Sandra Allwine has been pleading with her bank for more than two years to modify the mortgage on her Arlington County home. Despite exhausting all her savings and having her daughter move in to help with her $3,000 mortgage payment, Allwine, 65 and unable to find work, is struggling to save her home from foreclosure.
In June, a potential lifeline opened up. The newly launched $1 billion Emergency Homeowners’ Loan Program, or EHLP, is targeting homeowners who are among the most difficult to help: those who fell behind on their payments because of job loss or unexpected medical bills. For many of them, it might be the last chance to save their homes.
“We were normal middle-class Americans who had saved and lived very carefully and frugally . . . and still wound up getting kicked in the teeth,” Allwine said. She applied as soon as she heard about the program.
If she is approved, the government will subsidize Allwine’s mortgage payments for a maximum of $50,000 over two years. After that, the interest-free loan will be forgiven over five years if she stays in her home and stays current on her payments.
EHLP is the latest government program targeting the nearly 1.8 million homeowners like Allwine facing foreclosure. It is going to have to move fast: The program was supposed to start last year, but implementation delays mean that the Department of Housing and Urban Development must spend all its $1 billion by the end of the federal government’s fiscal year, Sept. 30.
That gives homeowners in 27 states, including Virginia, until July 22 to complete their applications. If demand outstrips available funds, HUD will run a lottery to pick successful applicants. Five additional states, including Maryland, are subject to slightly different rules, which gave them more time to spend the funds, because they started taking EHLP applications earlier under similar state-run programs.
Terri Ware of Greenbelt applied for the program in May after she was unable to get her bank to modify the $238,000 mortgage on her condominium. Her daughter Micah was born last year with a heart defect that requires around-the-clock care. So Ware, 43 and a single mom, left her job as an emergency room nurse at Prince George’s Hospital Center in Cheverly so she could care for her. But with her income shrinking and medical expenses escalating, she quickly burned through all her savings and her 401(k) and fell five months behind on her mortgage. Foreclosure loomed.
“I said, ‘I can’t be homeless — my baby needs help,’ ” Ware recalled.
Within a month, Ware was approved for $29,608 in aid through EHLP. The interest-free loan will repay $8,636 worth of mortgage payments that she owes in arrears to J.P. Morgan Chase and then pay about half her $1,727 mortgage payment for the next 24 months.
Ware was ecstatic when she found out. “I picked my daughter up and said, ‘We’re going to keep our home,’ ” she said with tears in her eyes. She plans to resume working and making mortgage payments on her own as soon as her daughter’s health improves.
Maryland has committed $4.2 million in EHLP loans to 121 homeowners, Maryland Department of Housing and Community Development Deputy Secretary Clarence Snuggs said, and “we’re going to be working up until the last minute” to spend the $40 million that the state has been allocated under EHLP.
Nationwide, HUD is hoping to help 30,000 homeowners through the program, including 1,120 in Maryland and 1,223 in Virginia, which received $46.6 million in funding. The District is hoping to assist as many as 1,000 homeowners under a separate program for which it has $20 million, said D.C. Housing Finance Agency Executive Director Harry Sewell.
But not everyone sees the merits of programs such as these during lean fiscal times.
“The best foreclosure mitigation program in America is a job. It’s not a government check, it’s a paycheck,” Rep. Jeb Hensarling (R-Tex.) said in a statement. In February, Hensarling sponsored a bill to kill the EHLP, calling the program “an act of fiscal child abuse.” By a vote of 242 to 177, the House agreed. But the Senate didn’t act on it.
Rep. Barney Frank (D-Mass.) fought to include the program in the 2010 financial reform bill. “If you took out a reasonable mortgage in the first place and the only reason you can’t pay it is because you became unemployed, there’s reason to help,” he said in an interview.
Frank proposed taxing large financial firms to fund EHLP, but House Republicans opposed that proposal. Some analysts say that leaves Congress with difficult moral questions.
“What’s the moral superiority of the borrower who did nothing wrong versus the taxpayer who did nothing wrong?” said Mark Calabria, director of financial regulation studies at the Cato Institute, a free-market think tank. In the end, he thinks EHLP will amount to “a drop in the bucket” for America’s foreclosure problem, while future generations will have to pick up its $1 billion tab.