Obama Announces Another TARP Housing Program

On February 29, 1010, President Obama announced another $1.5 billion dollars will be allocated to 5 states to help with the dropping housing prices.  The program has been called Help for the Hardest-Hit Housing Markets of (4HM).  As the name implies, it only applies to the hardest hit markets.  In this case, the program applies to 5 states, Arizona, California, Florida, Michigan, and Nevada who have all experienced over 20% drop in housing prices.

This program is different than the Making Home Affordable program which was funded with $75 billion and open to all the states.  As a reminder, the original program was meant to help homeowners modify their loans by giving funds to incentive lenders.  While the program helped a lot of people, it was strict in it requirements.  Specifically, homeowners could only qualify if they could afford the modified mortgage payments or were not incredibly underwater.  It did not help the unemployed or the houses that were severely underwater.

The new 4HM program is considered a pilot program of sorts because the restrictions are left up to each State’s Housing Finance Agencies (HFA).  For example, California’s HFA can propose a plan to help unemployed home owners, home owners who are severely underwater or only address second mortgages only.  These plans will be submitted to the Treasury for approval that the plan meet the broad goal of providing meaningful support to the home owners.  The approved plans will be posted online and their results (or effectiveness) will be published online as well.

The 4HM program reflects a trend by government and lenders to address the housing issue in new ways.  If you recall, Citibank just recently launched a pilot program to allow foreclosure candidates to live in their home for 6 months before voluntary surrender.

The plan is innovative because it allows local and State housing officials become part of the solution without tapping their State budgets.  For example, a State may propose that some funds would go to cover short sale differences in underwater properties to get banks to obtain bank approval.  Or, an unemployed homeowner may apply for funds to cover them until they are employed.  The point is that President Obama is giving States a chance to take control of their situations in an attempt to help actual homeowners instead of giving money to banks. So if you live in one of those five States, keep up with your local and State Housing Finance Administration to see what plans they are developing.

Eddy Hsu is an attorney experienced in the areas of Bankruptcy and Family Law.  He is admitted to practice in California and the Northern District of California Bankruptcy Court. He may be reached at 415-230-5388, and via email at eddyhsu@ehsulaw.com. The above article is informational only and not legal advice for your specific situation.  Always consult directly with an attorney to obtain legal advice.