Don’t look now, but it looks like the state government officials in four states are actually taking federal funds and providing a lifeline to homeowners who are suffering from joblessness and house value declines.
Can You Get Government Mortgage Assistance From Your State?
So far, Florida, California, Michigan, and Arizona, out of the 10 states slated to receive federal funding, have decided to use their portion of the $1.4 billion dollars Obama has pledged in federal aid to throw struggling homeowners a lifeline and prevent foreclosures by offering homeowners the opportunity to sign up for mortgage payment assistance. These programs are designed to pay a portion, if not the entire monthly mortgage payment for each homeowner who is jobless. In addition, the programs will help underwater mortgagees (or those with an upside down mortgage) pay down their loan balances by adding a sum of cash per month to their regular mortgage payments. Neither of these programs is designed to be a permanent subsidy to the homeowner. Much like unemployment, there is a start date and an end date for receiving benefits, unless something within the homeowner’s situation changes.
And, as usual, the idea is being met with support and criticism. Consumer advocates think that this plan is a great way to help struggling homeowners stay in their homes while they look for work or make up the difference between what their house is worth and what they can refinance for, while other “experts” believe that this type of assistance will simply breed laziness. I will personally have to say that I’m actually siding with the proponents of this measure.
I am all for programs designed to help people who, through no fault of their own, find themselves in situations where they could lose everything that they’ve worked so hard for. Many millions of people have lost their jobs through corporate downsizing and failed businesses. Not to mention, we homeowners don’t really have control over the fair market value of our houses, do we? But, it never seems as though the people who are the most deserving of a helping hand are the ones who get it. Plus, with a finite amount of time to receive benefits, where is the motivation factor to sit at home and live off the government, like in many welfare cases? Homeowners lucky enough to receive such assistance will (hopefully) utilize the time they have to find gainful employment so that when the funding runs out, they can continue making their payments.
These are the people who would rather simply have the terms of their mortgages modified to reduce their payments so that they can keep on paying them, but don’t qualify for the Obama administration’s first plan, the mortgage modification program or mortgage bailout and rescue program. These people aren’t looking for a hand out. These are the folks who are truly looking for a hand up.
At least the federal government has stopped waving monetary incentives in front of the loan servicers in order to coax them to do the right thing. Instead of prodding lenders into action by handing them a check every time they process a mortgage loan modification or put the foreclosure process on hiatus, these programs actually put the money into the hands of the individuals who need them, even if it’s not all of them. Of course, the lenders will reap the benefits as well, simply because the loans are being repaid. I mean, who cares where the money comes from, right? They get to avoid the costly foreclosure process and keep toxic loans off the books. So this one’s really looking like a win-win for just about everyone involved.
Each of the four states currently involved with these programs have a slightly different take on how to administer them, while the other six still have plans in the works. Those six include Nevada, North Carolina, South Carolina, Rhode Island, Ohio and Oregon. We can only hope that the states are doing their very best to ensure equal access to funding for everyone who needs a helping hand and that many more states will be eligible and follow suit.