Emergency Homeowners’ Loan Program flop
Since the 1980s, Pennsylvania set up a program to help struggling homeowners which has enjoyed great success over the decades, inspiring part of the Dodd-Frank Wall Street Reform Bill passed in 2010. The Dodd-Frank provision offers homeowners who had lost a minimum of 15% of their income due to the economy or health problems. Help came in the form of interest-free, forgivable loans, and it was a noble cause, but one that most economists say has failed horribly, tangled in red tape and agency confusion.
The $1 billion Emergency Homeowners’ Loan Program will not even end up spending half of their budget because so few homeowners qualify and the program has experienced several delays. Applicants are required to be over 90 days delinquent, facing foreclosures and show proof that if they found a new job they could resume their normal mortgage payments.
One tough requirement is that homeowners can only have lost their job in the last 12 months, but many applicants have been unemployed for well over 12 months. The formula took into account income, arrears and monthly payments in a way that was so complicated, most applicants were rejected from a program set up to offer 24 months of assistance or $50,000 of aid (whichever came first).
Why such a loud public uproar?
The uproar over this failed program is that the initiative was promoted as a means to help the homeowners that could not qualify for other programs like HAMP that also failed to live up to the promise of helping millions of struggling homeowners. The program was promoted as an end of the line option for the underserved and was promoted as such, but the red tape is simply too restrictive to make the program work as designed.
This Friday, the Housing Department has to complete approval on the remaining applicants and anticipate that roughly 10 percent of the 100,000 applicants may qualify and will likely receive only $35,000 to $45,000 in aid, short of the $50,000 goal. “No one could have anticipated how difficult the statutory requirements make it to reach homeowners,” said HUD spokesperson, Lemar Wooley.