More than 50,000 struggling home owners in five American states plagued with high unemployment are set to benefit from $600 million federal funds aimed at countering foreclosures.
State Housing organizations in North Carolina, South Carolina, Rhode Island and Oregon can use funds from a program called as “Hardest Hit Fund” for combating foreclosures for sale that was announced in March according to a high official in the Treasury department. Herb Allison, a Treasury official said the five states had got their proposals approved and were now ready to start receiving aid. The funds will take some months to flow in state by state.
Counties in the five states have unemployment rates that exceeded 12% in 2009. This compares with the 9.6% national unemployment rate to be announced by the Labor department this weekend. According to Allison, the program is targeted at those needing it the most. He said that for those who benefit from the program, it will make a meaningful difference. The average home owner will benefit by $10,000 over the life of the program which will end in 2012.
The president announced a $1.5 billion ‘Hardest Hit Fund’ in February for California, Nevada, Arizona, Michigan and Florida where there was most declines in home prices. Because of pressure from lawmakers, the Obama administration extended the program in March to five states now ready to receive an additional $600 million.
There was a shift of funds worth $2.1 billion from an already existing program, the HAMP (Home Affordable Modification Program). The HAMP was itself part of the $700 billion financial rescue program initiated by the Congress in 2008.
The funds will help the states assist unemployed and under employed house owners become current on their housing mortgages. Some of it will assist home owners counter negative equity by reducing principal on loans or will be used to help in shorts sales of homes in order to avoid foreclosures.
In Ohio, unemployed home owners would get mortgage payment assistance for longer than the three months allowed under the National program. Ohio will get up to $172 million as part of this program, while North Carolina nets $159 million and South Carolina gets $138 million. Oregon has been handed $88 million and Rhode Island nearly $43 million.
The HAMP program has been criticized as ineffective. But Allison, who runs the bank rescue program, defended the housing program pointing out that the foreclosure prevention measures of the administration have mitigated the impact of a severe recession.
Allison said that the administration is doing what it can to help make home ownership more affordable for home owners who are struggling. They are helping these home owners stay in their homes for a longer period of time and avoiding foreclosures.
