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Emergency Foreclosure Aid for Homeowners Included in Federal Financial Reform Bill

August 4, 2010

Among the many articles about the large financial reform bill passed in July, our Riverside County loan modification attorneys were pleased to see an article zooming in on a provision specifically intended to help troubled homeowners. The San Francisco Chronicle's Net Worth column reported July 29 on the Emergency Mortgage Relief Program, which provides $1 billion for homeowners who are behind on mortgage payments. The program is not intended to replace loan modification programs like the Home Affordable Modification Program or private programs offered by lenders. Rather, it provides temporary loans to homeowners who are unable to pay their mortgages because of unemployment or medical problems.

In fact, the Emergency Mortgage Relief Program was created in 1975, but never funded until the financial reform bill was signed in July. The $1 billion in authorized funds will be available to homeowners starting on Oct. 1 and will be administered through the Department of Housing and Urban Development. The assistance is aimed at homeowners who are at least three months behind in their payments on a primary residence because of a substantial reduction in income due to involuntary unemployment, underemployment or medical problems. There must be a "reasonable prospect" that the homeowner will be able to make his or her own payments again in the future. In total, participants are eligible for 12 to 24 months' worth of mortgage payments, or up to $50,000. The assistance can take several forms, including loans, but HUD is not sure yet how it plans to administer the program.

Our Orange loan modification lawyers are pleased to see the federal government take this step. To be sure, it can't help homeowners whose financial problems are expected to be permanent or very long-term. But for someone who lost a job and has been unable to replace it in the bad economy, this program could be a lifeline. Lenders frequently have their own forbearance programs -- in which they suspend payments for a few months while the homeowner recovers from a financial shock -- but this program offers several advantages over such a forbearance. The federal program appears to have a much longer duration -- a total of 24 months -- and the "low-interest loan" envisioned by Rep. Barney Frank in the article would likely be cheaper than the interest on a mortgage written during the housing boom. And of course, a federal program would have no concerns about preserving profits, unlike lenders, whose profit-consciousness is widely blamed for the glacial pace of loan modifications.

Howard Law PC understands just how slow lenders can be to make loan modifications because we've helped homeowners secure loan workouts since the beginning of the housing crisis. Our Leucadia loan modification attorneys have spoken to many clients who have tried for months to get a clear answer from their lenders, only to get contradictory information or a runaround, or be told they need to send in paperwork yet again. We have come to believe that lenders do these things not because they are incompetent, but because they do not want to make loan modifications. Rather than saying so, lenders hold out false hope and even make false promises to their borrowers. We help clients hold them to those promises, through aggressive negotiations and, when necessary, litigation.

If you're sick of getting the runaround from lenders and you'd like to take action, Howard Law can help. To set up a free consultation, contact us through the Internet or call 1-800-872-5925.