For homeowners in Puerto Rico and the 32 states that didn't get "Hardest Hit" funds, assistance is on the way. The Emergency Home Loan Program provides up to $50,000 per eligible household to bring mortgages current and make up to 24 months of payments. Here are the eligibility criteria:

  • * Experiencing hardship that prevents borrowers from paying mortgage.
  • * Prior to the cause of mortgage delinquency, income must have been equal to or less than 120% of the Area Median Income (AMI).
  • * Must be at least three payments behind.
  • * Property must be principal residence.
  • * Income must have decreased at least 15% prior to delinquency.
  • * Must have received a foreclosure notice or be able to certify that you will be foreclosed on because of the delinquency.
  • * Your back-end ratio cannot exceed 55% of your post-hardship income. The idea is that you must be reasonably likely to be able to resume your payments within two years.
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Here's an example.

Mary has two children and lives in Los Angeles. Her husband abandoned the family six months ago and cannot be located. The family's income used to be $4,000 per month, but is now only $2,000 a month. She has a $1,200 a month mortgage and a $200 a month car payment. She has missed her third payment and just received a foreclosure notice. Can she qualify?

First, she needs to compare the pre-hardship income with her area's AMI. It's $68,200 for Los Angeles County, which is $5,683 per month. 120% of that is $6,820, and her family income was only $4,000 before her husband left, so she meets that requirement.

She is clearly experiencing a financial hardship, she is three payments behind, and has received a foreclosure notice.

Her income has dropped by 50%, which is considerably more than the required 15%, so she qualifies there as well.

How about the back-end ratio requirement? Before her husband left, they had an income of $4,000, and debts of $1,400 (the house payment plus the car payment). $1,400 is 35% of $4,000, so they were not being reckless with their money. Because her back-end ratio before the hardship was less than 55%, it seems reasonable that Mary will be able to resume her payments within a couple of years. She could, for example, locate her husband and force him to pay child support. Or she may remarry, or find a roommate, or sell the house. Two years is ample time to get back on track.

So Mary may be eligible for $3,600 to bring the mortgage current, and $13,920 in house payment assistance over the next two years (less than the maximum of $50,000 available). I'll explain that $13,920in the next post. It's complicated, to quote the movie.

How does the program dispense the money and how do you apply? I'll address that in my next blog entry.