Mortgage aid program is great – if you can qualify
The federal government’s new $1 billion emergency loan program to help struggling homeowners stay in their homes sounds great. But strict rules for who qualifies could keep most people from getting the help they need.
Federal officials say the Emergency Homeowners’ Loan Program will help 30,000 unemployed and underemployed homeowners in 27 states make their mortgage payments.
Homeowners have until July 22 to apply for these interest-free loans, which will cover a portion of their mortgage for up to two years or $50,000.
This isn’t a free ride for the wealthy.
You can’t get into the program if you and your spouse and anyone else on the mortgage make a combined income of more than $75,000 or 120% of the area median income.
Homeowners getting help have to use 31% of their monthly income for the monthly payment.
The trouble is, to get into the program you must:
- Have no unpaid federal debt, including student loans (unless you’re on a forbearance plan) or federal tax liens.
- Have no more than one 60-day late payment in the past two years on your first and second mortgages.
- Have no more than two liens (mortgages) on your home.
- Be a U.S. citizen, a U.S. noncitizen national or a qualified alien (everyone on the mortgage must meet this requirement).
- Not be in bankruptcy (personal or business).
- Be three months behind and have a letter from your lender saying you’re in breach of the mortgage.
- Have a household income at least 15% less than it was in 2009, or you can be unemployed or have lost income due to a serious injury or medical condition.
Those are high hurdles for anyone who’s been laid off, underemployed or suffered a medical crisis that caused them to lose income. Being unemployed makes it hard to pay the bills on time, including student loans and mortgages.
As anyone who’s collected unemployment eventually realizes, you pay federal and sometimes state tax on unemployment insurance benefits. If you don’t have taxes withheld from your weekly checks, you get a nasty surprise at tax time and a tax lien likely follows if you can’t pay.
If you lost your job, would you pay your student loans or send in the payment for the car you’re using to get to interviews?
There are some great things about this program. Unlike other federal mortgage assistance programs, the Emergency Homeowners’ Loan Program doesn’t involve lenders making decisions. Instead, it's credit counseling organizations.
But with this many rules to follow, it’s going to take a lot of hard work and persistence to find 30,000 homeowners that can be helped.
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