By Marci Greenstein
It’s hard to find any hopeful news about the housing crisis. There was a sharp decline in home sales in December. And the federal Home Affordable Modification Program, which was supposed to help homeowners avoid foreclosure, is not working. But Ruth Simon of the Wall Street Journal highlighted one state’s common sense approach to helping homeowners get through the darkest days, the Pennsylvania Homeowners’ Emergency Mortgage Assistance Program.
“[H]omeowners in financial distress receive either one-time loans that allow them to catch up on missed payments or continuing help with their mortgage payments for up to 36 months. The money is paid directly to mortgage companies and must be repaid when borrowers get back on their feet. Funding for the program comes from state appropriations and repayments of earlier loans.”
“Under the program, borrowers are put on a formal repayment plan once an annual review of their finances shows they have sufficient income. Borrowers have repaid more than $250 million, money that is funneled back into the program.”
Delaware and North Carolina enacted similar programs in their states. According to Simon, Rep. Barney Frank, Chairman of the House Banking Committee, would like to enact a similar program on the federal level, although some argue that it would be too costly. The Pennsylvania program spends an average of $10,500 per borrower.
The Pennsylvania program is a loan program, not a mortgage modification program, and that is the rub. Until the government requires more flexibility on the part of banks to modify mortgages, the housing crisis will remain just that. Still, a loan program like Pennsylvania’s may get many through the bleakest times while the federal government works on long-term fixes in the housing and job markets.