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What is the Homeowners' Emergency Mortgage Assistance program?

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The Homeowners' Emergency Mortgage Assistance program is a mortgage relief bill that is currently being reviewed in the U.S. House of Representatives committee on Financial Services. Since this bill is in the early stages of the procedure to become a law, it still has to overcome several major hurdles before (and if ever) it becomes a law. Nevertheless, it is worthwhile to take an in-depth look at this proposed program to understand precisely what type of actions lawmakers are working on to address the recent economic turmoil.

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Patterned closely after an existing law of the same name in Pennsylvania, the bill's overriding intent is to provide mortgage payment relief to people who have experienced financial hardship. The act, if written into law, would enable the Department of Housing and Urban Development (HUD) to provide mortgage assistance to financially distressed homeowners, while prohibiting a mortgage lender from commencing any legal action against the homeowner while they are receiving assistance under the act.

The official name of the bill, H.R.3142 - Homeowners' Emergency Mortgage Assistance Act, was introduced and sponsored by Representative Chaka Fattah (D) of Pennsylvania, and was referred to the House Committee on Financial Services on July 9th, 2009. At the time of this writing, no official action has been taken on the bill since that date.

Who Would Qualify

The Homeowners' Emergency Mortgage Assistance bill, as is currently written, allows HUD to make payments on mortgages (1-4 family residential properties only). Each of the following eight criteria must be met in order for a person to qualify for assistance.

  • Mortgage lender has sent to the mortgagor holder a notice of intent to foreclose
  • At least 2 full monthly installments due on the mortgage are unpaid after the application of any partial payments that may have been accepted but not yet applied to the mortgage account
  • The mortgagor is suffering financial hardship due to circumstances beyond the control of the mortgagor which render the mortgagor unable to correct the delinquency on the mortgage and unable to make full mortgage payments before the expiration of a 60-day period beginning on the date that notice was sent to the mortgagor in accordance with section 3(b) of the the act
  • There is a reasonable prospect that the mortgage holder will be able to resume full mortgage payments not later than 36 months after the beginning of the period for which assistance payments are provided and to pay the mortgage in full by its maturity date or by a later date agreed upon by the mortgage lender
  • Property is the mortgage holders principal place of residence
  • The mortgage holder does not have a mortgage on any other residential property
  • The mortgage holder has applied to HUD for assistance.
  • The mortgage holder has not been more than 60 days delinquent on a residential mortgage within the 2-year period preceding the delinquency for which assistance is requested, unless the mortgagor can demonstrate that the prior delinquency was the result of financial hardship due to circumstances beyond their control

What Qualifies as Financial Hardship?

What exactly constitutes financial hardship? The bill specifically says that HUD may consider information regarding the mortgage holders' employment record, credit history, and current income. A hardship may include, but is not be limited to, any one of the following items:

  • Loss of job of a member of the household
  • Salary, wage, or earnings reduction of a member of the household
  • Injury, disability, or illness of a member of the household
  • Divorce or separation in the household
  • Death of a member of the household.

Repayment of Assistance

Any financial assistance provided to a homeowner under the proposed program is treated as a loan. As such, the homeowner is expected to reimburse HUD per the guidelines listed below. HUD, in order to secure its interest in the loan, will place a lien on the homeowner's property.

  • Housing expense is less than 35 percent of net effective income

    If the mortgage holders' total housing expense is less than 35 percent of the their net effective income, they would be required to pay HUD the difference between 35 percent of the their net effective income - and their total housing expense unless otherwise determined by HUD after examining the mortgage holders financial circumstances and ability to contribute to repayment of the mortgage assistance.
  • Housing expense is greater than 35 percent of net effective income

    If the mortgage holders total housing expense is more than 35 percent of the their net effective income, repayment of the mortgage assistance shall be deferred until the mortgage holders total housing expense is less than 35 percent of the their net effective income
  • When mortgage is paid in full

    Notwithstanding points (1) and (2) above, if repayment of mortgage assistance is not made by the date that the mortgage is paid in full, the mortgagor shall make mortgage assistance repayments in an amount not less than the previous regular mortgage payment until the mortgage assistance is repaid.

Mortgage Holder Obligation to Notify Homeowners

The program also would require a mortgage lender to send a uniform notice to any homeowner facing foreclosure. This notice would inform the homeowner of the relief services available not only through the Homeowners' Emergency Mortgage Assistance program, but other agencies as well. The mortgage holder would be prevented from taking any legal action until 30 days have expired from when the notice was sent out. Additionally, should a homeowner qualify and be accepted into the program, no legal action could be brought against the homeowner as long as they are participating in the assistance program.

Outlook for the Bill

The homeowners' Emergency Mortgage Assistance act has a long, hard struggle on its road to becoming law. The next steps in the process are as follows; Report by committee, House Vote, Senate Vote, and finally a signature by the President of the United States. Though it's true that most bills do not become law, several members of the congress, including Senators Carl Levin (D, MI), Christopher Dodd (D, CT), and Arlen Spector (D, PA), and Representatives such as John Conyers (D, MI) have voiced their support for the bill.