I had a pleasant but not very productive chat with a representative from one of the Department of Housing and Urban Development‘s certified counseling agencies this week. I was inquiring about the Save Our Home AZ program, which is Arizona’s method to distribute its $125 million federal allocation from the Hardest Hit Fund aimed at the 10 states hardest hit by foreclosures. The stated intention is to” provide assistance of up to $50,000 to qualified homeowners to create an affordable and sustainable mortgage payment through a permanent principal reduction modification.”
Or not to distribute the money, is actually what’s happening. To date only a handful of people have gotten help through this program.
Why is that? It’s certainly not because there aren’t tens of thousands of Arizona homeowners with legitimate need. It’s not even because the people who would like to apply for this assistance didn’t fill in the paperwork correctly! It’s because the vast majority of homeowners aren’t even eligible to apply.
First, you’re ineligible if your current mortgage is the result of a refinance. Even for someone like me who refinanced into a standard 30-year fixed-rate mortgage to get out of one of those awful 80/20 adjustable-rate mortgages. Apparently making a good financial decision like that is to be punished.
Even worse, apparently, was a refinance from which the borrower took some of the equity in cash. I did that during my refinance not to finance a luxurious vacation or to spend frivolously, but instead to pay off credit card bills from the cross-country move that led to my buying the house. How irresponsible of me!
Here’s the really big one, the criterion that excludes the majority of homeowners from even applying. From the Arizona Dept. of Housing website:
“If you have a Government issued or insured mortgage such as a VA (Veteran’s Administration), FHA (Federal Housing Administration), Fannie Mae (Federal National Mortgage Association) or Freddie Mac (Federal Home Loan Mortgage Corporation) loan, these investors are not currently allowing principal reduction on these mortgages. Therefore, you are not currently able to benefit from this program.”
That means the vast majority of borrowers do not meet the criteria. According to web sources, Fannie Mae and Freddie Mac hold or guarantee about half of the nation’s outstanding home mortgages. And the FHA, VA and federal farm programs made up 54% of all new mortgages in 2009.
So who, exactly is this Arizona program supposed to be helping? Oh, yeah, the same people the mortgage modification programs are supposed to be helping. Except they aren’t, for the most part.
Of the $75 billion the federal government initially committed for helpful initiatives like the Home Affordable Modification Program (HAMP), total disbursements to mortgage programs were only about $710 million through the end of October 2010. Of the three to four million homeowners the highly touted but largely impotent HAMP program and other initiatives were supposed to help, only about half a million homeowners have received permanent modifications to their mortgages.
Why do these government agencies, federal and state, keep creating highly publicized “home retention” programs for which very few borrowers can actually qualify? Arizona’s Hardest Hit Fund program was supposed to be helping 4,000 homeowners, but the HUD counselor I spoke to said only a few have qualified so far. Don’t say you’re going to help and then do everything you can to not help. That’s just mean. And pointless.
There are lots of good, honest, hard-working people who need real help now. Instead they get an ongoing shell game that inevitably ends up in foreclosure. It’s time for the government that is supposed to be serving the public to stop lining the pockets of corporate banks.