A $600 million fund has been created for five states hit hardest by the foreclosures crisis, as announced by the Department of Treasury.
Agencies for housing finance can start using these funds locally in North Carolina, South Carolina, Rhodes Island, Ohio and Oregon. The money is targeted at states having counties with unemployment rates touching 12%, according to a top treasury official, Herb Allison.
According to Allison, these states have made comprehensive programs to help home owners struggling to make mortgage payments after falling victim to unemployment.
The fund is expected to help 50,000 home owners. The Treasury received from the states detailed plans on how they would use the funds. For example, Ohio will help home owners meet their mortgage payments up to 12 months while they search for employment.
Rising unemployment is interfering in government efforts to help people avoid foreclosures. The national rate of unemployment hovered around 9.5%. Economists predicted that it will climb to 9.6% this weekend.
A $1.5 billion Hardest Hit Fund has already been doled out to Nevada, Michigan, Florida, California and Arizona. Treasury plans to announce a third round of aid totaling $2 billion. The money will be transferred from the Troubled Asset Relief Program (TARP) Fund.
At the same time, according to a new law the Department of Housing and Urban Development has to supply $1 billion in loans of short term to home owners who are unemployed and are unable to meet mortgage payments.
In North Carolina, the funds will be used like this to avoid foreclosures. The mortgage program will be started in seventeen counties in middle of October and made available state wide in December.
Two smaller programs will help home owners suffering from wage cuts. One will refinance a second mortgage of high cost and another will reduce the principal of mortgage through a modification of loans to avoid foreclosures.
The second mortgage refinance program will be offered only in counties with high unemployment. These programs will be implemented through January to April 2011. Most of the programs will give help in the form of zero interest on loan, forgiven for 10 years provided the home owner continues to live in the house avoiding foreclosures.
The Hardest Hit Fund proposals were submitted by the Housing Finance Agencies to the Treasury on June 1st. Each proposal was reviewed by the Treasury to ensure compliance with the Emergency Economic Stabilization Act of 2008.
The Hardest Hit Fund program was started to be complementary to the Home Affordable Modification Program of the Obama administration unveiled in 2009, to fight foreclosure properties.
