The U.S. House of Representatives voted to pull the plug on HUD's Emergency Homeowner Loan Program (EHLP) last month, but that hasn't stopped HUD from moving ahead to put the money into the hands of distressed homeowners.
The fund was established under the Dodd-Frank Act and provides zero-interest, deferred payment ""bridge loans"" of up to $50,000 for unemployed homeowners to continue making their mortgage payments while they look for a new job. HUD just deployed nearly $200 million of the $1 billion allotted to state agencies.
Through EHLP, a total of 32 states and Puerto Rico are slated to receive funds to help unemployed homeowners in their communities. This first round of funding sent a total of $198 million to five states:
* Pennsylvania - $106 million
* Maryland - $40 million
* Connecticut - $33 million
* Idaho - $13 million
* Delaware - $6 million
""The Emergency Homeowner Loan Program will provide limited and targeted assistance to help working families get back on their feet and keep their home while they look for work,"" said HUD Secretary Shaun Donovan. ""We are pleased to get the program off the ground"" in these five states, he added.
HUD had initially unveiled the program last October At that time, officials said their intention was for the program to begin taking applications by the end of the year. The delay in deployment of funds has been point of frustration for state housing agencies and lawmakers alike.
The city of Philadelphia went so far as to impose a moratorium on sheriff's sales in anticipation of the implementation of the EHLP and the receipt of federal funds to assist unemployed homeowners in the area.
To be eligible for EHLP assistance, borrowers must have experienced a substantial reduction in income brought on by layoff, underemployment, or a medical condition. They must be at least three months behind on their payments and have a reasonable likelihood of being able to resume their housing obligations within two years.
The home must be the borrower's principal residence, and they must be able to demonstrate a good payment record prior to the event that caused the reduction of income.
""These loans will help families who lost jobs through no fault of their own and are just trying to keep their heads above water,"" said Sen. Barbara Mikulski (D-Maryland). ""These are tough times. People deserve a government that's on their side. I voted for the Wall Street Reform and Consumer Protection Act to end unfair and abusive practices on Wall Street and help people who work hard and play by the rules. Helping families stay in their homes is an important part of that.""
Rep. Spencer Bachus (R-Alabama) is chairman of the House Financial Services Committee and was one of the driving forces behind the bill to terminate EHLP.
Bachus says that although ""it's a well-intentioned program,"" it's also a ""$1 billion failed spending program."" According to Bachus, the program loses 98 cents for every one dollar it spends.
The House bill which rescinds the program's $1 billion in funding is not expected to make it through the Senate. Even if it does, the White House has vowed to veto it.