The housing crisis hit the United States with a vicious punch and left thousands of homeowners facing foreclosure. The federal government responded earlier this year with the implementation of the Hardest Hit Fund, a program designed to provide help to struggling homeowners in states experiencing high rates of foreclosures.
Rhode Island has received $79.4 million from the program administered locally by Rhode Island Housing. The agency’s executive director, Richard Godfrey, recently took time to speak about the program, which is expected to prevent 5,000 to 10,000 foreclosures during the next two years.
PBN: Can you give us a quick overview of the Hardest-Hit Fund? Is this a new program?
GODFREY: The U.S. Treasury has made available $80 million in financial assistance to Rhode Islanders who are at risk of losing their homes. Rhode Island Housing has been designated by the treasury to oversee the program, which is called Hardest Hit Fund Rhode Island. The agency will be processing, approving and administering the submissions from lenders, servicers or specially trained HHFRI certified counselors.
The goal of HHFRI is to prevent avoidable foreclosures by helping Rhode Island homeowners who are unable to make their mortgage payments due to a documented financial hardship such as job loss or underemployment. There were more than 3,000 foreclosures in Rhode Island in 2009. At the end of June of this year, more than 7,400 loans were more than 90 days delinquent. Because of these economic conditions, the Hardest Hit Fund was established to help Rhode Islanders stay in their home.
If homeowners have a documented financial hardship, we encourage them to contact their mortgage lender or servicer or a specially certified counselor. HHFRI payments are intended to complement existing federal and lender programs, and will only be available to owner-occupied homeowners who have exhausted all other options.
This program is new. It launched on Nov. 1 in Providence, which had the highest number of foreclosure in the state. On Dec.1, lenders and specially certified counselors will start processing applications statewide.
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PBN: If a homeowner receives assistance with mortgage payments, do they need to pay that money back eventually?
GODFREY: The funds are being administered in the form of a zero-percent interest loan forgivable at 20 percent per year over five years. For example, a homeowner who receives $6,000 in assistance will have their obligation reduced by 20 percent per year, or $1,200 each year for five years.
After five years, the lien will be discharged, and there will never be any obligation to repay. If that homeowner sells the home at the end of the third year of the loan and makes a profit, he or she will only need to pay back the last two years of the loan ($2,400) because the loan is forgivable at 20 percent per year over five years.
However, the homeowner only must pay the loan back if there is money available from the sale of the home. Otherwise, it is completely forgiven.
In addition, there are funds available for homeowners who – if they are unable to stay in their home – could receive a grant to help facilitate a short sale or deed-in-lieu of foreclosure.
PBN: How does a Rhode Islander at risk of losing a home start the process? How long does it take until they start seeing some relief?
GODFREY: Assistance will vary but generally includes help obtaining a loan modification from your lender in the form of assistance in making mortgage payments while unemployed or underemployed. Also, there is help to make an immediate payment to save your home such as unpaid property taxes and relocation assistance for homeowners who are in a severe financial crisis.
There are two ways to apply for HHFRI help: Through your local bank or credit union that has a loan servicing department in Rhode Island or through a HUD-approved and HHFRI-certified counselor such as the Rhode Island Housing HelpCenter. (Visit www.HHFRI.org for a listing of specially trained counselors.)
There is quite a bit of documentation homeowners will need, such as bank statements, income verification, tax documents, etc. Their lender or a counselor will let them know what they will need to bring, and their respective lender or counselor will help them fill out the application.
Due to the great deal of information and documentation that must be collected, and shared among the borrowers, lender/servicer and HHFRI, communication among these groups can be challenging. Reaching a final agreement can take a few months in some cases.
PBN: Do you have any estimates on how many Rhode Islanders will use the program?
GODFREY: The Hardest Hit Fund Rhode Island likely will prevent between 5,000 and 10,000 foreclosures over the next two years, and the staff at HHFRI is reaching out to Rhode Islanders through a series of community meetings. The next one is Tuesday, Dec. 7, at 6:30 p.m. at Family Resources Community Action, 245 Main St., in Woonsocket. A listing of community meetings can be found at www.HHFRI.org.
PBN: How is this different from programs Rhode Island Housing already runs?
GODFREY: Rhode Island Housing is a major provider of loans to first-time homebuyers in Rhode Island. Rhode Island Housing works to ensure that all people who live or work in Rhode Island can afford a safe, healthy home that meets their needs. Our belief is that a home encompasses much more than four walls and a roof. A good home provides the foundation upon which families can thrive, children can learn and grow and communities can prosper.
Rhode Island Housing also operates the HelpCenter, a HUD-approved and HHFRI-certified counseling center. The HelpCenter offers assistance to homeowners who have non-Rhode Island Housing mortgages and who are struggling to a make payments on those loans. They can contact the HelpCenter at (401) 457-1130 or visit the HelpCenter at www.rhodeislandhousing.org..
Rhode Island Housing mortgage customers with documented financial hardships that have an impact on their ability to pay their mortgage should call (800) 854-1180 to discuss these options. However, HHFRI assistance is available to all homeowners as well as long as their lender participates.
