In the big picture, $1 billion is a pittance (what a billion amongst friends), but the latest federal program to staunch the housing disaster is like all the others - troubling, unfair, and bemusing all at once. Here is the kicker in this one, you only qualify if you lost income (i.e. thru job loss, underemployment etc). Which I assume would make it hard to make the mortgage payment... but what do I know.
Essentially if you borrow $50K from the government your fellow citizen (interest free), and keep your payments on time... each year 20% of the loan is forgiven. Make 5 years of payment and you get handed $50,000 for free, for acting like anyone else who pays their mortgage. Step right up...
- For the roughly four million homeowners who have fallen behind on their mortgage payments, the federal government is offering yet another remedy: free money to catch up on their loans.
- The effort, called the Emergency Homeowners Loan Program, is the latest in the federal government's efforts to slow down the flood of foreclosures a necessary step to a meaningful recovery in the housing market, says a Department of Housing and Urban Development official. For people who have lost their jobs, the $1 billion program offers loans of up to $50,000 that don't actually need to be repaid, if applicants meet certain requirements.
- Rolled out by HUD and the nonprofit housing advocacy group NeighborWorks America, the program is making loans with far better terms than anything on offer at a local bank. The loans are interest-free. Payments go directly to the lender for a portion of the borrower's monthly mortgage, including missed payments or past due charges.
- And when the assistance period -- which runs for up to two years -- ends, 20% of the loan is forgiven with each passing year. In other words, for qualified borrowers who stay in their home for at least five years after the assistance period and who don't fall behind on their mortgage again, this money doesn't have to be paid back.
Some potential downfalls:
- If they sell their home before the entire loan is forgiven, they'll be on the hook for the remaining amount. The same holds true if they fall behind on their mortgage payments again: they'll need to repay the remaining balance of the loan when they sell or refinance their home.
But you need not have equity in your home!
- .... borrowers aren't required to have equity in their home to receive this money, so someone who has to repay this loan risks owing more on the home later than they do now.
- For homeowners who are significantly underwater now, the loan may only delay foreclosure/
Not sure how those who have lost income will pay this loan back, but hey it's only money from the fellow taxpayer ...
- To be eligible, homeowners must have lost income and be at risk of foreclosure due to involuntary job loss, underemployment or a medical or other economic condition; details on the application process are available online through NeighborWorks America.