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Wednesday, June 22, 2011

Mortgage help reaches few Floridians

Most of the thousands of struggling Florida homeowners seeking mortgage assistance from the federal government's Hardest Hit Fund have been rejected by the state's version of the program, a new report shows.

The rejection rate is running at 80 percent for the 2,700 applications already processed.

More than 10,000 homeowners have completed applications seeking as much as six months of financial assistance with their mortgage payments, according to the report by the Florida Housing Finance Corp., which is administering the state's $1 billion share of the federal program.

Of the applications tested so far against Florida's rules for the program, 2,144 have been rejected and only 52 of the remainder have made it to final approval.

"I don't think we would have wanted to make the qualifications more broad and have more people qualify," said Cecka Rose Green, spokeswoman for the Florida Housing Finance Corp. "We want people who have the best chance of sustaining and keeping their homes. … We could literally be in the position where we're throwing good money after bad."

Top reasons for rejecting homeowners: Applicants, if unemployed, were in some way at fault for losing their jobs; if working, they were not considered "underemployed"; they were six months or more behind on their mortgage payments; or they had enough income to spend 31 percent of it on housing expenses.

Other rules that have led to rejected applications: In about 150 cases, the value of the house was less than half of the total mortgage amount; in 91 cases, applicants had incomes that far exceeded the local median income; and in 54 instances, the homeowners had unpaid principal of more than $400,000.

Seminole County resident Mindy Huggins Clay may be among the small minority of successful applicants. She said she has been approved to receive $668 a month in assistance for the loan on her Longwood-area home. Clay, who said she earns $250 a week as a photo researcher for Vanity Fair magazine, fears an eviction, with her household goods dumped unceremoniously outside.

"It could be garbage bags on the driveway — they don't even put them on the driveway, do they?" she said. "… Garbage bags in the road."

The Hardest Hit Fund was initiated by the federal government in February 2010 to provide targeted aid for families in states most affected by the housing slump and the 2007-09 recession. Florida, California, Arizona, Nevada and Michigan were the first states to get approved for the program, which has now been expanded to 19 states. Each state develops its own rules under federal guidance.

The various homeowner bailouts are still new enough that even the first states accepted into the program have limited information about how many applicants have succeeded in obtaining aid.

Michigan, which launched its program in March, a month before Florida did, has received more than 5,400 applications. While many of them have not been fully processed, 857 have been approved, said Mary Townley, the state's director of homeownership.

Nevada reported that, during the first quarter of this year, it had 21 rejections out of 652 applicants; the rest were still being processed.

"What we found was that people were much slower responding — much slower than we had anticipated," said Tiffany East, a spokeswoman for the Nevada Affordable Housing Assistance Corp., which is administering the program there. "They were taking more time to get documentation back to us. It actually put us further behind in getting people through the process. We thought it would be 30 days, but it's really taking 45 days."

The U.S. Treasury Department oversees the program and receives reports from states but does not analyze the program's performance by state.

In addition to the high rate of rejections in Florida, the number of applicants has been disappointing to some, including Florida Housing Finance Corp. Chairman Len Tylka.

"We haven't had the volume that everyone had expected," he said this week. "The money's not just running out the door."

He said some homeowners may not have applied because of a sense of helplessness. "It could be that some folks feel that [they're] so far underwater it's not worth reaching out," he said. "There's still plenty of [aid] capacity out there."

Tylka has been among those who have raised concerns about the program in Florida. Earlier this week, he said the latest reports show that it takes unemployed Floridians an average of nine months to find work, and yet Florida limits its mortgage assistance to no more than six months.

Others have criticized Florida's program for failing to offer reductions in applicants' mortgage principal, as programs in California and Arizona do. And U.S. Sen. Bill Nelson, D-Fla., has said the state has been slow in distributing the money.

The Florida Housing Finance Corp. delayed a February launch of the program when newly elected Gov. Rick Scott asked that the assistance be cut from a proposed $35,000 over 18 months to just $12,000 over six months.

Some public officials have taken issue with the very concept of spending government dollars to help pay mortgages in a state where jobs have been slow to return and houses are worth about half what they were four years ago during the peak of the home-buying frenzy.

State Rep. Darren Soto, D-Orlando, called Florida's oversight of its Hardest Hit Fund a "billion-dollar blunder." He thinks some foreclosures are necessary to heal the market, and he would like to see at least some of the money spent on helping people who lose their homes walk away from the situation without all of the usual debt-related problems.

Soto, who has unsuccessfully introduced foreclosure-reform bills in the Florida Legislature, said he empathizes with people faced with losing their homes to the bank, "but we need to focus on strategies that seek final resolution of these matters. Temporary assistance isn't getting to the root of the problem. … Default rates on those programs are huge."

mshanklin@tribune.com or 407-420-5538
Some concerns about assistance
Rejections: Among the reasons for being turned down for mortgage help: Being six months or more behind on payments, having too little value in the home relative to the total mortgage, or having more than $400,000 in unpaid principal.
Timeframe: One official says it take most unemployed Floridians nine months to find work, but the state limits mortgage help to a six-month stretch.
No reductions: Other states offer to reduce the amount of mortgage principal owed.

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