What You Need to Know About the Emergency Homeowner Loan Program

Distressed mortgage borrowers have been looking for ways to get their mortgages back on track for years. While some opportunities for loan modifications and other foreclosure assistance have been offered since the housing crisis impacted the economy in 2008, there are still millions of homeowners in in danger of losing their homes.

Recently, the U.S. Department of Housing and Urban Development (HUD) announced it is signing delinquent homeowners up for a mortgage relief program that could help them stay afloat. The program is currently in the pre-screening phase and is looking for borrowers to jump on board fast.

What is the Emergency Homeowner Loan Program?

The HUD Emergency Homeowner Loan Program (EHLP) was originally announced last October as one of the latest options offered by the federal government to assist homeowners who are struggling to pay their mortgages. It is a part of the Dodd-Frank Wall Street Reform and Consumer Protection Act.

The EHLP offers homeowners what is known as a one-time, interest-free “bridge loan.” This loan is meant to help homeowners become current on overdue mortgage costs and make monthly mortgage payments (including principal, interest, taxes and insurance) for a period of two years or up to $50,000. The loan becomes a junior lien against the borrower’s home.

The good news is no payments are due on the bridge loan for five years, as long as the borrower stays current on mortgage payments and meets other requirements. After that time, the balance is reduced by 20 percent a year until nothing is owed and the junior lien is eliminated.

That’s right. It’s possible for the loan to be forgiven.

HUD estimates the program will help about 30,000 homeowners with an average amount of $34,000 each in loans. The hope is that homeowners who are currently underwater or thinking about turning in their keys will reconsider and accept this assistance.

Who is Eligible?

The EHLP, similar to the HAMP loan modification program and other mortgage programs that have started under the government, has a list of eligibility requirements that narrow down those who qualify for assistance.

While it’s best to check the program’s website for more information, here are some general eligibility guidelines to go note:

• You must be involuntarily unemployed or underemployed after losing a job or suffering from a serious medical condition.
• You must be at least 90 days delinquent on your mortgage payments on your primary home.
• You must have received a notice of foreclosure.
• Your income has to have dropped by at least 15 percent.
• You have to anticipate resuming home payments within two years.
• You must meet the income eligibility criteria (your household income in 2009 must have been at or below $75,000 a year or 120 percent of the area median income for a household size of four).

One thing to keep in mind is that homeowners in only 32 states and Puerto Rico are eligible for the loans. The states are Alaska, Arkansas, Colorado, Connecticut, Delaware, Hawaii, Idaho, Iowa, Kansas, Louisiana, Maine, Maryland, Massachusetts, Minnesota, Missouri, Montana, Nebraska, New Hampshire, New Mexico, New York, North Dakota, Oklahoma, Pennsylvania, South Dakota, Texas, Utah, Vermont, Virginia, Washington, West Virginia, Wisconsin and Wyoming.

The remaining states and Washington, D.C. have not been included because they are receiving billions of dollars in assistance from the Hardest Hit Fund, which assists distressed homeowners in states with unusually high unemployment rates or home prices that dropped more than 20 percent.

Get Pre-Screened by July 22

If you find that you may qualify for this program, now is the time to jump on board since HUD is only allowing homeowners to get pre-screened until July 22. After this date, it is presumed that selected homeowners will be allowed to apply.

While the EHLP could be a good alternative to those who have considered a previous mortgage modification program with no luck, ConsumerAffairs.com warns homeowners to beware of fraudsters who are likely to want get in on the action.

If you are called by someone who claims to be a part of EHLP, be advised that no one from the program will call to solicit participants. Also, if you receive communication from someone asking for advance payment and promising to apply on your behalf, assume it is a con artist and discontinue contact.

It’s not too late to get pre-screened. So if you feel you qualify, visit the EHLP website or contact your local HUD office for more details.