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South Carolina Eligible for Federal Initiative to Help Families - 3/31/2010

The Obama Administration on Monday announced that South Carolina may receive as much as $138 million as its share of a $600 million initiative to help families stay in their homes or otherwise avoid foreclosure in states that have been hit hard by concentrated economic distress. The program, known as the Housing Finance Agency Innovation Fund for the Hardest Hit Housing Markets (or “HFA Hardest Hit Fund”) makes $600 million available to five states with high concentrations of people living in economically distressed areas, defined as counties in which the unemployment rate exceeded 12 percent in 2009.

 

South Carolina’s share of these funds will be administered by the South Carolina State Housing Finance and Development Authority (SC State Housing). 

 

South Carolina ranked 25th in the country for foreclosure rates in 2009, but currently has one of the highest unemployment rates, surpassed only by Michigan, Nevada, and Rhode Island, according to SC State Housing’s Executive Director Valarie M. Williams. “The pain of losing a home is the same whether you are in Nevada or South Carolina,” she said. “We hope this program will be a major step toward stemming foreclosure in our state, stabilizing our housing market, and bringing some relief to families who have already been devastated by job loss and the effects of a prolonged economic downturn.”

 

South Carolina will share in this round of funding with North Carolina, Ohio, Oregon, and Rhode Island. These states were selected for their high concentrations of people living in economically distressed areas, defined as counties in which the unemployment rate exceeded 12 percent in 2009.

 

Though each state is encouraged to respond to local conditions, Treasury has outlined a number of transactions that states should consider. Among them are:

 

·        Unemployment Programs – Programs may provide for assistance to unemployed borrowers to help them avoid preventable foreclosures.

 

·        Mortgage Modifications – Programs may provide for modification of mortgage loans held by HFAs or other financial institutions or provide incentives for servicers/investors to modify loans.

 

·        Mortgage Modifications with Principal Forbearance – Programs may provide for paying down all or a portion of an overleveraged loan and taking back a note from the borrower for that amount in order to facilitate additional modifications.

 

·        Short Sales / Deeds-In-Lieu of Foreclosure – Programs may provide for assistance with short sales and deeds-in-lieu of foreclosure in order to prevent avoidable foreclosures.

 

·        Principal Reduction Programs for Borrowers with Severe Negative Equity – Programs may provide incentives for financial institutions to write-down a portion of unpaid principal balance for homeowners with severe negative equity.

 

·        Second Lien Reductions – Programs may provide incentives to reduce or modify second liens.

 

Each program must be in full compliance with all federal, state, and local laws – including but not limited to – the Equal Credit Opportunity Act and the Fair Housing Act, which prohibit discrimination on a prohibited basis in connection with mortgage transactions. Mortgage modification programs are subject to all fair lending laws.

 

Detailed program guidelines will be released by April 12, which will include additional information regarding submission guidelines and timing of proposal submissions. HFAs will then have a period to submit their program designs in order to receive funding.
 
“SC State Housing welcomes this assistance and looks forward to working with the US Treasury and the numerous organizations in South Carolina who now devote so much time and energy into keeping families in their homes,” said Scott Smith, Commission Chairman for SC State Housing. “We will begin immediately to develop creative and effective strategies to maximize the use of this timely and needed support.”

 

Funding for this program comes from a $50 billion fund already allocated to the administration’s Home Affordable Modification Program (HAMP), the housing component of the Troubled Asset Relief Program (TARP).