President announces $1.5 billion plan to help struggling homeowners

LAS VEGAS – Feb. 22, 2010 – A plan to channel $1.5 billion to housing agencies in five states hit hardest by the real estate crash has Florida officials hopeful they can keep more people in their homes and out of foreclosure.

President Obama announced the program Friday while in Nevada for a town hall meeting and campaign push for Senate Majority Leader Harry Reid. The states included in the new program are Nevada, California, Arizona, Florida and Michigan, all of which consistently rank high on any measure of mortgage woe.

But with more than 20 percent of its home loans seriously delinquent or in foreclosure, Florida tops the nation for defaults, according to a Mortgage Bankers Association report also released Friday.

Obama administration officials called the $1.5 billion “modest” considering the depth of the nation’s housing crisis but said they hope it will lead states to come up with innovative solutions tailored to their own needs.

Those solutions are expected to plug holes in the administration’s earlier Making Home Affordable Program, which has struggled to help unemployed homeowners who don’t have the income to qualify for a loan modification.

It also attempts to tackle one of the thorniest issues to come out of the market meltdown – how to cope with upside-down loans where the homeowner owes more than what the property is worth.

About 41 percent of South Florida borrowers, and 55 percent of Treasure Coast borrowers were underwater in December, according to analysts at Zillow.com.

The $1.5 billion in taxpayer money, which is coming from the federal Troubled Asset Relief Program, can be used to help negotiate with lenders to write down mortgages on underwater loans.

“This really could be extraordinary relief that will be very welcome in Florida,” said Jaimie Ross, president of the Florida Housing Coalition. “It’s pretty clear this is a program designed to keep homeowners from losing their homes.”

The money will be doled out to states based on a formula that considers home price declines and unemployment. Officials couldn’t say Friday how many people it might help.

There was some optimism Friday that the national housing market has begun to make a turn for the better.

The Mortgage Bankers Association survey showed that despite continued record foreclosures, there was a small decrease in the number of loans 30-days late in the last quarter of 2009.

That means fewer homes entered the foreclosure pipeline.

“We are likely seeing the beginning of the end of the unprecedented wave of mortgage delinquencies and foreclosures,” said Jay Brinkman, chief economist for the association.

Brinkman said he usually sees an increase in 30-day delinquencies in the last quarter of the year because of holiday spending and home heating costs.

Instead, national 30-day delinquencies fell from 3.79 percent to 3.63 percent. In Florida, the 30-day delinquencies fell from 4 percent to 3.67 percent.

The drop off may also be attributed, in part, to foreclosure rescue plans such as the Making Home Affordable Program.

The program offers incentives to banks to reduce mortgage payments by cutting interest rates or principal amounts, but has been panned by critics for not reaching enough people.

A year into the program, 116,297 permanent loan modifications, including 14,598 in Florida, have been completed. But that’s only a fraction of the estimated 3.4 million loans nationwide that are 60 or more days delinquent.

Boynton Beach resident Lenore Cohen, 81, said she’s been overwhelmed by the loan modification process, which she said has included harassing letters from her bank and notices of non-payment, even when she paid.

“They said it could take eight months,” Cohen said. “I have two huge folders filled with paperwork. It’s been very disturbing.”

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