Five More States to Receive Mortgage Assistance

By:: Kara Johnson | March 30, 2010

The Treasury Department has announced an additional $600 million in aid to help homeowners avoid foreclosure in states that have been hardest hit by the economic downturn.

The funds will be distributed through housing finance agencies in North Carolina, Ohio, Oregon, Rhode Island and South Carolina. Today’s announcement brings to 10 the number of states receiving assistance under the administration’s Housing Finance Agency Hardest Hit Fund, first unveiled in February.

The initiative is designed to fund innovative efforts to help families stay in their homes or otherwise avoid foreclosure. Housing Finance Agencies (HFAs) in states receiving the funds will develop their own programs, then submit their proposals to the Treasury Department in order to receive funding.

Five other states – California, Florida, Arizona, Michigan and Nevada – are to share $1.5 billion in initial funding under the program, as was announced in February. Those states are currently working to develop their proposals for submission to the Treasury Department.

Examples of programs that might qualify for funding include assistance to unemployed borrowers, mortgage modifications, principal forbearance, second lien reductions and facilitating short sales/deeds in lieu as alternatives to foreclosure.

The five additional states announced today for funding under the program were selected on the basis of having high concentrations of people living in economically distressed areas, defined as counties where the unemployment rate exceeds 12 percent. That designation applies to less than 15 percent of the U.S. population.

The new criteria differ from those used to select the first five states, which were chosen because all had experienced average home price declines in excess of 20 percent.

The $600 million in new funding will be distributed among the five additional states as follows: Ohio, $172 million; North Carolina, $159 million; South Carolina, $138 million; Oregon, $88 million and Rhode Island, $43 million.

The funds are being provided out of unspent monies allocated under the Troubled Asset Relief Program (TARP), which originally allocated up to $700 billion to purchase bad mortgages and similar “troubled assets” to help stabilize financial institutions and the economy. Under the Obama administration, some of the funds have been repurposed for foreclosure mitigation efforts.

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