With more foreclosure filings and few job opportunities for unemployed homeowners, the U.S. Department of Treasury recently announced funding awards for states suffering severe economic challenges. States benefiting will be locales where unemployment rates meet or surpass that of the national average or where the decline in home prices is greater than 20 percent since the housing market downturn. The recently announced funding totals $3.5 billion and will be spread among 19 states.
In the news release announcing the funding, Herb Allison, assistant secretary for Financial Stability said, “This administration recognizes that unemployment and steep home price declines are concentrated in specific states and localities; so we will continue our work to stabilize the housing market and assist distressed homeowners in states hardest hit by these economic realities. We believe that these efforts at the state level will help get local housing markets back on track and complement our national housing stability and foreclosure prevention efforts.”
States receiving awards and their corresponding amounts are: Alabama, $101.9 million; Arizona, $142.7 million, California, $799.4 million; District of Columbia, $13 million; Florida, $401 million; Georgia, $212.6 million; Illinois, $279.2 million; Indiana, $138.9 million; Kentucky, $93.9 million; Michigan, $215.6 million; Mississippi, $63.8 million; Nevada, $202.9 million; New Jersey, $188.3 million; North Carolina, $57.1 million; Ohio, $249.7 million; Oregon, $82.8 million; Rhode island, $22.8 million; South Carolina, $98.7 million and Tennessee, $136.2 million. Detailed information on these awards is available at http://www.financialstability.gov/roadtostability/hardesthitfund.html.
Although the program began in February of this year with only five states sharing $1.5 million in assistance, continued economic challenges in the rest of the nation led to include more states and an investment, to date, of $7.6 billion. California, the nation’s most populous state, and one of the initial five receiving monies, has now received $1.9 billion through this one program. Florida, another of the five original states receiving awards, has also received more than a billion dollars of assistance.
According to research by the Center for Responsible Lending (CRL), from 2007 to 2009, 2.5 million foreclosures were completed. In addition to the devastating impact these foreclosures will have on the affected households, they will also cause a “spillover” effect by depressing the value of nearby homes owned by families who are paying their mortgages on time. In just one year (2009), 69.5 million homes near foreclosure properties, but still occupied, lost an average of $7,200 in value per home and $502 billion nationwide.
For 2010, CRL analysis of the latest Mortgage Bankers Association’s National Delinquency Survey determined that nearly one in 10 homeowners is either in foreclosure or more than 60 days past due on their mortgage. Additionally, nearly one in five homeowners is underwater, owing more money than their home is now worth.
By 2012, CRL projects another nine million foreclosures will occur nationwide with 92 million families losing $1.9 trillion in lower home values.
One late breaking development may alter the pace of foreclosures. Following a series of questions as to whether major lenders properly reviewed foreclosure documents prior to evictions, one federal regulator, the Office of the Comptroller of the Currency has now asked seven of the nation’s largest lenders to review files for errors.
On Sept. 30, before the U.S. Senate Banking Committee, John Walsh, OCC acting director, said, “We both want to see that they fix the processing problems but also to look to see whether there is specific harm in individual cases,” he said.
As Mike Calhoun, CRL president observed earlier this year, “The rules on home lending need to get stronger, not weaker. We need to make sure a foreclosure crisis of this type never happens again, and, though so many homes have been lost, it’s not too late to prevent more damage.”
(Charlene Crowell is the Center for Responsible Lending’s communications manager for state policy and outreach. She can be reached at Charlene.firstname.lastname@example.org.)