Foreclosure fund gets $600 million to help residents of 5 more states save homes
The Obama administration announced Monday that it is expanding by $600 million a fund aimed at helping states tackle the foreclosure crisis with locally tailored approaches.
State housing finance agencies from North Carolina, South Carolina, Ohio, Oregon and Rhode Island will share $600 million to test new approaches to helping borrowers save their homes from foreclosure. That is in addition to $1.5 billion set aside for California, Nevada, Arizona, Michigan and Florida when the program was initially announced in February. Both initiatives will be financed through the government's Troubled Assets Relief Program.
While the first round of funding targeted states that had seen home values decline more than 20 percent, the second round of states were picked because they had high concentrations of people living in economically distressed areas, including counties where the unemployment rate exceeded 12 percent in 2009.
After the Obama administration announced the initial program, it immediately received pleas for help from other states hit hard by the foreclosure crisis, including Ohio. "This is a victory for Ohio's struggling homeowners," said Inez Killingsworth of Empowering and Strengthening Ohio's People, a nonprofit group that had lobbied for the state to be included in the program. "This is an important step, one that understands the great need in Ohio."
Again, the state housing finance agencies are tasked with developing innovative approaches to the growing challenge that unemployment and falling home prices have posed to mortgage relief efforts. That could include incentives for lenders that cut the principal owed by owners who owe more than their home is worth, known as being underwater. The "innovation funds" are expected to address gaps in the federal response to the foreclosure crisis.
"It's attempting to enable local innovation," said Herb Allison, a Treasury assistant secretary. Many of the programs are likely to be focused on helping unemployed borrowers, he said, but not all of them.
This comes after the Obama administration announced last week it was revamping its national approach to foreclosure prevention. The new federal guidelines require lenders to cut the payments of homeowners who can prove they have lost their job for at least three months. It also increases incentives for lenders to cut loan balances for borrowers who owe more than their homes are worth because of falling home prices.
Overall, government official have said, they hope their efforts will help up to 4 million borrowers avoid foreclosure. If that goal is reached, millions of borrowers will still lose their homes to foreclosure over the next few years but, officials said, perhaps enough will be prevented to generate some stability in the housing market.