Obama Administration Approves Granholm Plan to Help Homeowners Avoid Foreclosure with $154.5 million in Federal Funds

Banks, credit unions will partner to help more than 17,000 Michigan households starting July 12

LANSING, MI – June 23, 2010 – (RealEstateRama) — The U.S. Departments of Treasury and Housing and Urban Development (HUD) have approved the Granholm Administration’s plan to distribute $154.5 million in federal funds beginning July 12 that should help more than 17,000 Michigan households avoid foreclosure, including 11,000 homeowners who are currently drawing unemployment benefits and are struggling to make monthly mortgage payments.

“When homeowners can’t make their mortgage payments it can be devastating,” said Governor Jennifer M. Granholm. “These funds will help unemployed Michigan homeowners, and those who have fallen behind due to unforeseen circumstances such as a medical emergency, work out arrangements with their mortgage lenders so they can remain in their homes.”

In February President Obama announced $1.5 billion in funding for innovative measures to help families in the states that have been hit the hardest by the aftermath of the housing bubble. The Michigan State Housing Development Authority (MSHDA) was selected as one of the five state Housing Finance Agencies (HFAs) to share in the Hardest-Hit Fund investment with an award of $154.5 million. The amount was determined through a formula by HUD and the U.S. Dept. of Treasury that measured state unemployment and home value depreciation in 2009. The other four participating states are Arizona, California, Florida and Nevada.

Michigan will be the first of the nation’s five state HFAs to implement its plan. MSHDA will use the time between today’s approval and the launch of the program on July 12 to hire and train staff, provide information to potential applicants statewide about the program and educate participating banks and credit unions about the application process, said MSHDA Director of Homeownership Division Mary Townley.

“We are eager to invest the resources provided by the Obama Administration to help Michigan homeowners prevent foreclosure as quickly and efficiently as possible,” Townley said. “Banks and credit unions will play an integral role in the success of the new program because they will work with homeowners to determine eligibility criteria and best available options. The smartest advice we can give potential applicants is to contact their mortgage servicers to ensure they make an informed decision.”

Michigan’s Hardest-Hit Fund plan is designed to help homeowners who are currently receiving unemployment compensation, homeowners who have fallen behind in their mortgage payments or taxes due to a temporary layoff or medical emergency, and those homeowners who can no longer afford their mortgage payments due to lower income. It was developed in partnership with representatives from the Michigan Bankers Association, the Michigan Credit Union League, the Michigan Association of Community Bankers, the Michigan Association of Realtors, the Michigan Foreclosure Task Force and MSHDA’s statewide homeownership counseling network.

Applications completed by homeowners and their loan service provider will be submitted for approval to MSHDA, with final approval of applications expected to occur within 48 hours of receipt of a complete application package. MSHDA is adding additional staff to review and process the applications, which will be processed on a first-come, first-served basis beginning July 12. MSHDA anticipates it could take 12-18 months before the state’s Hardest-Hit Fund is entirely distributed.

Nationally, more than 57 percent of mortgage delinquencies can be attributed to job loss. MSHDA’s decision to focus the majority of its efforts on the problems facing Michigan’s unemployed is the proper strategy to pursue, according to Michigan Credit Union League President and CEO David Adams.

“Michigan is in the midst of an historic remaking of our economy,” Adams said. “Our state’s biggest challenge is sustaining homeownership for unemployed and underemployed borrowers. This plan provides a blueprint on how Michigan credit unions, banks and policymakers can work together to help those who need assistance while transitioning to the 21st century economy.”

Since 2008, MSHDA has received nearly $1 billion in combined federal funds for new programs that are improving the state’s housing stock, making housing costs more affordable, preventing foreclosure, rebuilding cities and creating jobs. MSHDA has helped Michigan’s effort to overcome historic economic challenges by becoming one of the nation’s most innovative housing finance agencies.

Under Gov. Granholm’s leadership, Michigan is heralded as a model for the nation in the development of policies and partnerships to help both those who are at risk of becoming homeless and those who reside in shelters or on the street and need longer-term assistance in order to obtain and sustain housing. MSHDA has spearheaded the Michigan Campaign to End Homelessness, the nation’s only statewide strategic initiative tailored to the diverse needs and challenges of each of Michigan’s 83 counties.

“We credit Governor Granholm and her team for producing a Hardest-Hit Fund plan that offers win-win-win solutions,” said Alessandro P. DiNello, President of Flagstar Bank and a member of the Michigan Bankers Association board of directors. “Families will be able to keep their homes, lenders will be able to receive prompt cash dispositions on troubled loans and community property values of surrounding neighbors and local businesses will be preserved.”

The Michigan State Housing Development Authority is dedicated to building a thriving and vibrant future for Michigan. MSHDA provides tools and resources to improve people’s lives through programs across the state. These programs assist with housing, build strong neighborhoods, and help create places where people want to live and work. MSHDA’s programs work in four areas: affordable rental housing; supporting homeownership; ending homelessness; and creating vibrant cites and neighborhoods.*

*MSHDA’s loan and operating expenses are financed through the sale of tax-exempt and taxable bonds as well as notes to private investors, not from state tax revenues. Proceeds are loaned at below-market interest rates to developers of rental housing, and help fund mortgages and home improvement loans. MSHDA also administers several federal housing programs.

Contact:
Mary Lou Keenon
MSHDA Communications Office
Telephone: 517/373-0011