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.
  • Featured Home Equity Loan Provider
      • Get your Free Quote in Minutes!
      • Lenders Compete for your Business
      • Lock in a Low Fixed Rate Before Rates Increase!
      • Do you have the Lowest Rate Possible? Find Out Instantly!

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.