GO
Loading...

Over Half $1 Billion Foreclosure Aid Program Ends Unspent

The federal government will disburse just $432 million from a $1 billion program to help unemployed homeowners avoid foreclosure, a government official said Thursday.

The rest of the money will return to the U.S. Treasury because the Emergency Homeowners' Loan Program has ended, and not enough people were approved in time to receive aid.

The funding provided forgivable loans up to $50,000 to temporarily help unemployed or underemployed people avoid foreclosure in 32 states and Puerto Rico.

Out of 100,000 applicants, 11,832 were conditionally approved for the program that the government initially said could help up to 30,000 people. Assistance will average $35,000 to $45,000 a homeowner, said Brian Sullivan, a spokesman for the Department of Housing and Urban Development.

The program's failure to reach or process enough applicants in time is "sad and shameful," says Lewis Finfer, executive director of the Massachusetts Communities Action Network. It worked to pass the legislation to make the program possible.

Finfer, other community groups, and Rep. Barney Frank, D-Mass., have said that HUD took too long to launch the program.

HUD started taking applications in June — almost a year after the program was made possible by Wall Street reform legislation — and six months later than HUD first intended. The deadline for HUD to commit the funds was Sept. 30.

Of the 32 states, five had similar programs, so they ran their own while HUD administered the program in the other 27 states.

Pennsylvania, one of the five, spent its entire allocation of $106 million and approved 3,056 homeowners — 26% of the U.S. total. Only Texas and New York got more funds than Pennsylvania.

The HUD loans are to be forgiven if homeowners keep their homes for five years.

"We understand that there is disappointment that the program is not reaching more families," said Carol Galante, HUD's acting assistant secretary for housing, in prepared testimony for a congressional hearing Thursday reviewing the Obama administration's response to the nation's foreclosure crisis.

Galante repeated HUD's defense that the program's setup "took longer than anticipated." She also said the program's eligibility requirements, which were defined by the law that created the program, disqualified a higher number of applicants than anticipated.

Finfer and others say HUD added additional eligibility requirements and failed to advertise the program.

This story first appeared in USA Today.

Contact U.S. News

  • CNBC NEWSLETTERS

    Get the best of CNBC in your inbox

    › Learn More

Don't Miss

U.S. Video