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Foreclosure Relief Funds Aren't Getting to Borrowers

columbian.com | November 29, 2013

By Pamela M. Prah

Some of the states hit hardest by the foreclosure crisis aren’t spending millions of dollars that the federal government has set aside to help struggling homeowners, a new report shows.

Of $7.6 billion the federal government has provided in the “Hardest Hit Fund” to help homeowners, states have disbursed only $3 billion, according to a report from the Congressional Research Service, a nonpartisan service that provides information to Congress.

The Hardest Hit Fund is one of several initiatives the federal government created after the recession to help families keep their homes. Eighteen states and the District of Columbia have 66 programs that use money from the Hardest Hit Fund, which is allocated to each state depending on various factors, including the impact of the housing crisis in the state and the percentage of residents who are unemployed or underemployed.

CRS found that states have disbursed widely varying percentages of their Hardest Hit money, from 21 percent in Alabama to 84 percent in Rhode Island. Some of the states hit hardest by the foreclosure crisis have distributed the lowest percentages, including Florida (26 percent), Michigan (29 percent), Arizona (34 percent) and California (36 percent). As of October, Florida still had the nation’s highest foreclosure rate. Nevada, which has distributed a little more than half of its Hardest Hit money, had the second-highest rate.

In addition to Rhode Island, Oregon and the District of Columbia also disbursed a relatively high percentage of their Hardest Hit money, nearly 70 percent each.

The first dollars from the Hardest Hit Fund flowed to California, Arizona, Florida, Nevada and Michigan in February 2010. Those states had the largest declines in home prices and high foreclosure rates. Later in 2010, the federal government expanded the program to 13 states and D.C., all of which had unemployment rates higher than the national average. States are required to submit plans to the Treasury, which administers the program, explaining how they would use the money.

Critics say the Treasury is at least partly to blame for states’ low payout rates. In a separate report in late October, the Office of the Special Inspector General criticized the Treasury for failing to specify how many homeowners states should help.

Last month, the Treasury approved changes to some of these states’ Hardest Hit programs.

n Arizona created a waiver allowing homeowners to receive assistance that exceeds the $2,000 per month cap, but the maximum assistance still can’t exceed $48,000.

n New Jersey reduced the maximum assistance available to homeowners to $24,000.

n South Carolina received approval to launch a new program that provides up to $36,000 in principal reduction to homeowners when they modify a loan.

These changes were included in the latest monthly report that the Treasury provides to Congress on the Troubled Asset Relief Program, or TARP.

 

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CFLA was founded by the Nation's Leading Foreclosure Defense Attorneys back in 2007 to serve the Foreclosure Defense Industry and fight pervasive Bank Fraud. Since opening our virtual doors, CFLA has rapidly expanded to become the premier online legal destination for small businesses and consumers. But as the company continues to grow, we're careful to hold true to our original vision. For us, putting the law within reach of millions of people is more than just a novel idea—it's the founding principle, just ask Andrew P. Lehman, J.D.. With convenient locations in Houston and Los Angeles, you can contact Our National Account Specialist and General Manager / Member Damion W. Emholtz at 888-758-2352 for a free Mortgage Fraud Analysis or to obtain samples of work product, including cutting edge Bloomberg Securitization Audits, Litigation Support, Quiet Title Packages, and for more information about our Nationally Accredited and U.S. Department of Education Approved "Mortgage Securitization Analyst Training Certification" Classes (3 days) 24 hours for approved CLE & MCLE Credit (Now Available Online).

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