As loan program nears end, a race to help homeowners

July 08, 2011|By Jenifer B. McKim, Globe Staff

Lt. Gov. Timothy Murray says the program lets some homeowners borrow money…

Amid concerns that not enough unemployed Massachusetts homeowners have applied for zero-interest federal loans intended to help them make mortgage payments, state officials yesterday began a campaign to generate more interest in the $61 million program before the application period expires in two weeks.

The Emergency Homeowners’ Loan Program is expected to benefit more than 1,200 out-of-work Massachusetts residents by allowing them to borrow money for up two years. In certain cases, the loans will not have to be repaid.

But the Massachusetts Communities Action Network, a nonprofit that has long lobbied for unemployment assistance, said only a few hundred homeowners have submitted applications since June 20, when the program opened. Housing advocates attribute the slow response to a lack of knowledge about the availability of the loan money, as well as some homeowners’ wariness about offers of mortgage relief.

“If you are out of work, having trouble making ends meet and facing foreclosure, this loan program has the potential to help you get back on your feet,’’ said Lieutenant Governor Timothy P. Murray, who has started speaking out to publicize the program.

Nationwide, the government is offering $1 billion in bridge loans. It is one of a growing number of efforts to help jobless homeowners, who are now viewed as a major reason behind the country’s continuing foreclosure crisis.

Another federal program, unveiled yesterday, will allow qualified unemployed homeowners to stop making mortgage payments for up to a year.

The Department of Housing and Urban Development said the effort should help tens of thousands of unemployed US homeowners, including many in Massachusetts, whose loans are guaranteed by the Federal Housing Administration - about 14.3 percent of current mortgages.

Until now, jobless homeowners with FHA loans have been allowed so-called forbearance periods of four months.

In addition to the FHA change - which takes effect next month - the Obama administration said it will now require lenders participating in the federal Making Home Affordable Program - set up to speed loan modifications - to extend their minimum forbearance periods from three months to a year, when possible.

“The current unemployment forbearance programs have mandatory periods that are inadequate for the majority of unemployed borrowers,’’ said Shaun Donovan, secretary of the Department of Housing and Urban Development.

By extending the nonpayment period, Donovan said, homeowners will have more time to find work and stabilize their finances.

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