News and analysis from The Center for Michigan • http://thecenterformichigan.net
©2013 Bridge Michigan. All Rights Reserved. • Join us online at http://bridgemi.com
Original article URL: http://bridgemi.com/2013/02/michigan-still-using-federal-dollars-to-fund-mortgage-assistance-programs/
26 February 2013
As she struggled to hold onto her home after her hours as a retail clerk were slashed, a 66-year-old Kentwood resident initially lost $1,300 in a scam run by a company that promised to help the woman and her husband avoid foreclosure.
Then she found out about a state program that provided her with a free state-certified housing counselor through the Michigan State Housing Development Authority. The Michigan Hardest Hit Funds program is paying $370 a month to her mortgage lender for 12 months to cover half her payment. The Unemployment Mortgage Subsidy Program also paid $1,400 to clear up her delinquent payments. Instead of losing the home she and her husband have lived in for two decades, she’ll be able to live there while the couple get back on their feet financially.
The Unemployment Mortgage Subsidy Program offers financial assistance to unemployed homeowners who need to catch up on delinquent payments and need help paying their current mortgages for up to 12 months.
The Loan Rescue Program helps homeowners who have fallen behind on their mortgage payments and/or property taxes by paying past due property taxes or helping repay mortgage delinquencies.
The Modification Plan Program helps homeowners who may have fallen behind on their mortgages or whose homes are worth less than the amount owed by paying the delinquent amount and/or contributing toward the unpaid principal to reduce the amount owed. The lender must agree to modify the existing mortgage to lower the monthly payments.
The Principal Curtailment Program helps homeowners who owe more on their homes than their homes are worth by paying up to $10,000 toward the principal owed, with the lender agreeing to lower the principal by the same amount. The lender also has to agree to modify the existing mortgage to lower the monthly payments.
Five years after the word “foreclosure” became synonymous with crisis in Michigan, state government continues to funnel hundreds of millions of dollars in housing assistance to select borrowers in need. While news reports recently featured a settlement with major lenders over foreclosure practices, that money – around $2,000 for each affected household – is coming long after most of the recipients have lost their homes. The more effective programs are tapping federal money to get homeowners current on their mortgage and property tax payments and give them a chance to get back on their feet.
The Kentwood homeowner didn’t want to share her name, but she’s one of tens of thousands of Michigan residents who have received help in the continuing foreclosure crisis.
RealtyTrac showed Michigan with 59,055 homes up for foreclosure in December, with one of every 732 housing units receiving a foreclosure filing that month. Michigan ranked seventh nationally in new foreclosure activity in December, with 6,189 new foreclosures filed, including 1,900 in Wayne County alone.
But help increasingly is available, not just for those struggling to hold onto their homes, but for residents who lost their homes to improper foreclosures.
About 480,000 Michigan residents who saw their homes foreclosed on from 2008-2011 may be eligible to split $90 million the state is receiving through the National Foreclosure Settlement. Eligible homeowners had loans with bank mortgage servicers Bank of America, Citi, Chase, Wells Fargo and GMAC/Ally, which were found to have taken residents’ homes without following adequate foreclosure practices. The amount each affected household can receive will depend on how many people file claims, according to Michigan Attorney General Bill Schuette, but it’s expected to be around $1,500 to $2,000. The deadline for all claims was Jan. 18, and Schuette expects payment checks will be mailed in mid-2013.
For those still struggling to hold onto their homes, MSHDA offers several programs through $498.6 million in federal funds awarded as part of the Troubled Asset Relief Program. Homeowners can qualify for up to $30,000 in assistance. The loans are provided at 0 percent interest and require no monthly payments. One-fifth of the loan amount will be forgiven each year as long as the property remains the homeowner’s primary residence. In January, the programs were extended to help homeowners who faced foreclosure because of delinquent property taxes as well as delinquent mortgages.
“We only fund what the homeowner needs, so it’s up to $30,000,” said MSHDA Director of Home Ownership Mary Townley, who noted the average award is $8,000. She said the programs are a win for both the homeowners and for the mortgage lenders, who don’t want to own thousands of foreclosed homes.
“If we can stabilize that family in their home, they will continue to be a taxpayer, they will continue to visit the grocery store down the street,” Townley said. “It’s stability for the community.”
None of the state programs will help those who are hopelessly behind on their mortgage payments or haven’t been trying to keep up their payments. Nor will the mortgage counselors attempt to get a homeowner back in the black if there’s a chance the homeowner can’t keep up with the payments after the financial assistance stops.
Homeowners getting the help agree that’s fair. A carpenter from Wyandotte who got help catching up on $4,000 in back payments on the modest tract home he lives in with his wife and two young children said he never intends to fall behind again, even though he’s making considerably less money than before the recession and was injured for a while last year.
“We’re much more responsible. … We’ve learned lessons from the past, getting into debt,” said the homeowner, who didn’t want his name used.
He’s very grateful for the homeowner assistance program, noting: “The state of Michigan saved my house.”
The Center for Responsible Lending, a nonprofit group based in North Carolina, argues that foreclosure assistance extends well past the families involved. In October, it calculated that the more than 10 million foreclosures nationwide since 2007 led to $1.95 trillion in lost property value for people who “live in close proximity to foreclosures.”
According to the federal government, Michigan had helped 7,300 borrowers through the MSHDA programs as of last Sept. 30, the most recent data available. They include people who are receiving unemployment compensation, who have fallen behind on their mortgage payments through no fault of their own and are working to overcome their financial problems, and those who can’t afford their mortgage payments because their income has dropped.
“Michigan has a dual crisis” because tax foreclosures quadrupled from 2007 to 2011, said Neeta Delaney, director of the Michigan Foreclosure Task Force. “We’ve lost roughly half a million homes (to foreclosure) since 2005.”
Ingham County Treasurer Eric Schertzing, who deals with $20 million in delinquent property taxes every year, said the homeowner assistance is helping a lot of people get back on their feet.
“Someone who was unemployed two years ago but now has a job, we can help them catch up on those back taxes,” he said. “We’re seeing the end of the tunnel.”
Kathy Barks Hoffman covered Michigan government and politics for more than two decades as a reporter for the Detroit News, the Lansing State Journal and the Associated Press, where she headed AP’s Lansing Bureau for nearly 17 years. She now works in Lansing for the Public Affairs Practice of public relations firm Lambert, Edwards & Associates.