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| foreclosure and equity loss: overview » introduction » connect with assistance |
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By connecting families with low-cost refinance loans, second mortgages, and emergency loans, state or local housing finance agencies can help homeowners avoid foreclosure and stay in their home at a monthly mortgage payment that they can afford. Lengthen the foreclosure timeline through a moratorium or other extension Extending the process of home foreclosure through a temporary moratorium may allow homeowners additional time to reduce the financial damage of foreclosure. Expand the availability of legal services for file review and foreclosure prevention assistance Legal assistance can be a critical resource to help families stay in their homes and prevent financial losses by negotiating alternatives to foreclosure. | ||||
| You are currently reading: Connect struggling homeowners with immediate assistance Strategies that provide immediate foreclosure prevention assistance include short-term emergency loans, preferential refinancing products, 24-hour hotlines, and expanded outreach by reliable non-profit assistance organizations. Other pages in this section:  Establish a foreclosure prevention task force to facilitate a comprehensive approachCommunities can develop a comprehensive response to foreclosures by convening representatives of government, industry, and non-profit organizations.  Help families regain stability after a foreclosureWhen preventing the foreclosure is not possible, communities can help renter and homeowner families find, qualify for, or afford a new rental home.  Reduce the risk of foreclosures in the futureCommunities can prevent foreclosure by increasing outreach in areas with high foreclosure risk and by helping families to avoid risky mortgage products. See the clickable timeline of foreclosure prevention policies. Click here to view other resources on preventing foreclosures and equity loss. |
In addition to offering hotlines and other one-stop foreclosure prevention resources, communities need to actively promote these tools to connect families to the resource they need. Governments are a natural leader for getting the word out and ensuring that families can trust that the assistance is reputable. There are many different ways for governments to promote these tools, as the following examples show.
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| Foreclosure Prevention Outreach in Ohio Ohio's Foreclosure Prevention Taskforce, a broad partnership similar in many respects to HOPI in Chicago, has supplemented the state's 211 non-emergency hotline with a few in-person options for comprehensive foreclosure prevention assistance. In September 2007, the Taskforce held Borrower Outreach Days in three different parts of the state. Borrower Outreach Day includes foreclosure prevention education and counseling as well as opportunities for on-site borrower-lender communication, refinancing, and loan modification. As a periodic resource, Borrower Outreach Day clearly can not stand alone; however, it offers one-stop access to a range of foreclosure prevention resources while also renewing the media's attention to existing foreclosure prevention options. Learn more about Ohio's Foreclosure Prevention Taskforce. |
| Cause of Mortgage Delinquency | Short-term crisis (job loss, medical emergency, etc.) | Unaffordable mortgage terms and minimal refinance barriers | Unaffordable mortgage terms and serious refinance barriers |
| Community Options | Short-term emergency loans | Low-interest refinance loans, possibly with flexible underwriting requirements | Refinancing with flexible underwriting requirements, silent second mortgages, or shared appreciation loans |
| Examples | Delaware, Maryland, North Carolina, Ohio, Pennsylvania | Connecticut, Maryland, Massachusetts, New York, Ohio, Pennsylvania | Maryland, Minnesota, New Jersey, Pennsylvania |
| Pennsylvania's Mortgage Assistance Programs The Pennsylvania Housing Finance Agency (PHFA) provides three different types of foreclosure prevention loans targeted to the diversity of homeowners' needs:
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| Click on the links below to learn more about loan products that can help families avoid foreclosure: Short-term emergency loans Low-interest refinance loans Refinancing with flexible underwriting requirements, silent second mortgages, or shared appreciation loans |
| With home foreclosures at a record high, state governments are considering different options to help families avoid foreclosure, or at the very least, manage the financial stress associated with it. One approach is to delay the process of home foreclosure through a temporary moratorium. Slowing the foreclosure process may allow homeowners additional time to settle their debts, refinance their mortgage, modify their loans, or sell their property to reduce the financial damage of foreclosure. [1] However, the outcomes from foreclosure moratoriums have not been documented, and if a moratorium is not linked to other programs that can help families and communities appropriately use the additional time they are granted, it may not resolve the family’s underlying affordability challenge. State and Local Examples As the number of home foreclosures rapidly escalates, some state government agencies are again considering foreclosure moratoriums. In April 2007, Massachusetts adopted a foreclosure moratorium policy to assist borrowers to avoid foreclosure with a 30-60 day freeze on action by the lender or loan servicer. The program is managed by the Division of Banks, which operates out of the Massachusetts Office of Consumer Affairs & Business Regulation, whose priority is to allow for families to stay in their homes in order to give them additional time to develop and implement their own plan of action to work out a possible alternative to foreclosure. | History of Foreclosure Moratoria in the U.S Foreclosure moratoriums date back to the Great Depression. During the 1930’s, the State of Minnesota enacted a law that imposed two-year moratoriums on bank foreclosures. Similarly, in 1933, the State of New York adopted a law that granted a moratorium for homeowners facing foreclosure but required homeowners to make a minimum payment to their lender (determined by the courts). This foreclosure moratorium renewed annually until 1949. More recently, in 2005, HUD granted home foreclosure moratoriums for FHA-insured homeowners in areas affected by Hurricanes Katrina and Rita for approximately a year. During this period, lenders were prohibited from initiating new foreclosures in order to give homeowners time to get back on their feet. |
| Click here for more information about foreclosure moratoria in Massachusetts. In March 2008, the city council of Philadelphia passed a 30 day foreclosure moratorium policy to try to stem the rising tide of foreclosures there. The policy is set to expire in May 2008. The State of Maryland has signed into law a bill in April 2008 that lengthens the minimum length of foreclosure proceedings to 150 days, up from 15 to provide homeowners with additional time and notice before a foreclosure sale. This bill requires the lender to wait 90 days after default before filing the foreclosure and to send notice to the homeowner 45 days before filing the action. The lender must provide proof of ownership when filing the foreclosure action. Homeowners are able to stop the foreclosure by paying what is owed until one day before the sale. Click here for more information about Maryland’s efforts to protect homeownership. The State of New York is currently considering the Brennan Bill, a one-year home foreclosure moratorium that if approved, would be granted to all court-ordered foreclosures. State lawmakers in New Jersey have also brought up the possibility of a six-month foreclosure moratorium to relieve homeowners, but as of April 2008, no action had been adopted. | Moratoria Considerations Although moratoria may be invaluable for a homeowner by delaying a foreclosure and can be an effective tool in some cases, it is not likely to represent a long-term solution. It is unclear how many families can resolve their financial difficulties within a 30-60 day moratorium period, but clearly there will be some families who need a longer time or more substantial assistance, such as a write-down of the principal balance of the mortgage. A longer moratorium period would provide the family greater options, but would be more controversial and also would not necessarily resolve the underlying problem of the family’s inability to afford their monthly mortgage payment. In a review of state policy options, State Strategies to Address Foreclosures, the National Governors Association (2007) cautions that foreclosure moratoriums may have unintended consequences because foreclosure delays can be costly to borrowers if their debt continues to accumulate if they are unable to modify their loans, sell their home, or repay their debt. |
| Federal Moratoria At the federal level, the HOPE NOW Alliance, a coalition of mortgage and banking industry groups, came together, at the behest of the Secretaries of Treasury and Housing and Urban Development, to craft and implement possible national solutions to the flood of subprime foreclosures. In December 2007, they implemented a massive outreach campaign through letters to troubled borrowers and a national ad campaign, pointing borrowers to the HOPE-NOW hotline where counselors could help with repayment plans and loan restructuring. To offer more time to families with impending foreclosures, HOPE NOW is implementing a 30 day foreclosure moratorium called “Project Lifeline.” HOPE NOW members, Bank of America, Chase, Citigroup, Countrywide, Washington Mutual and Wells Fargo, announced in February 2008 that they will offer to delay foreclosure proceedings for up 30 days for seriously delinquent borrowers who respond to a special mailing within 10 days. The moratorium is used to determine if a workout plan is possible for the borrower. The program expected to be operational by March 31, 2008. The website of the Financial Services Roundtable, the group coordinating the Alliance shares the following : These servicers will begin the program by providing a letter to seriously delinquent homeowners nationwide giving homeowners a simple “step-by-step” approach that, if followed, may enable them to “pause” their foreclosure for 30 days while a potential loan modification is evaluated. Servicers will reach out to homeowners on a nationwide basis – with this step-by-step approach to finding a solution which meets their individual needs. This is different than the “streamlined” approach to loan modification announced previously. It is a broad, national approach to help all homeowners individually. Subprime, Alt-A, and prime loans may qualify for this program, including second liens and home equity loans. These leading servicers – which represent approximately 50 percent of mortgages – will soon begin to reach out to homeowners giving them a few simple steps that may qualify them for a loan modification: Step 1: call your mortgage servicer. Step 2: tell the servicer you have received the letter, you want to stay in your home and you are willing to seek counseling, if necessary. Step 3: provide updated financial information so the servicer can explore an appropriate solution. Step 4: if appropriate, any pending foreclosure may be "paused" for up to 30 days during this review process until a formal decision is made and, if possible, a plan is created. |
[2] Addressing the Foreclosure Crisis: State and Federal Initiatives in
| There are over 900 legal aid offices at the state and local levels in the U.S., most of which operate under the Legal Services Corporation, a national entity created by Congress in 1974. These quasi-public agencies are intended to provide support to individuals and communities that typically do not have access to legal services – often the same populations most hurt by abusive loan practices. While most of these agencies serve clients on a range of legal needs, many have developed programs specific to home foreclosure and predatory lending issues, including litigation for fair housing, consumer protections, or education and advocacy. Legal Services of New Jersey, for example, has the Anti-Predatory Lending Project, which provides legal help to low-income homeowners who are at risk for foreclosure or the loss of equity as a result of predatory lending. They also promote homeowner education and outreach, as well as policy advocacy. Similarly, Legal Aid of North Carolina runs the Mortgage Foreclosure Project, which provides legal representation in foreclosure actions. The Project helps to preserve clients’ credit ratings, save homes from foreclosure, and make it difficult and expensive for predatory lenders to continue to engage in abusive loan practices. The Mortgage Foreclosure Project also promotes community education to increase awareness of home finance best practices and the dangers of predatory lending. Although the Legal Services Corporation provides funding to state and local aid agencies, many agencies are dependent on grants and other funding mechanisms to support their work. The Institute for Foreclosure Legal Assistance, a project of the Center for Responsible Lending, supports over 25 local legal aid providers with $15 million in grants to fund the litigation costs of foreclosure cases. This assistance is critical, since foreclosure cases can last several months and the attorneys that work in legal service corporation-funded organizations cannot collect attorney fees for their work. | Solutions in Action |
| Ohio's Save the Dream Program Ohio's Save the Dream program connects homeowners with legal services as part of a broad package of foreclosure prevention assistance. In April 2008, the state's attorney, chief justice, and Ohio State Bar Association president released a call to all qualified attorneys throughout the state to offer legal services to assist struggling homeowners. Over 1,100 attorneys registered to volunteer with the initiative and are being assigned to local legal services providers to be matched with clients. Attorneys will assist homeowners mediate disputes and represent homeowners restructure their loans for free. Ohioans can find a local attorney and find out about qualifying for legal assistance by calling the Save the Dream hotline. Currently, homeowners earning 250 percent of the AMI are eligible for legal support under this program. Click here to learn more about legal services assistance through Ohio's Save the Dream program. |
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Page last updated January 22, 2010 02:10 pm
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