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Extended EHLP (Read 'Help') deadline for homeowners facing foreclosure, employment struggles

by Broderick Perkins

(9/1/2011) ERATE Exclusive - The U.S. Department of Housing and Urban Development recently extended the deadline for qualified homeowners to apply for what could be a no-interest loan of up to $50,000.

Loans from the new "Emergency Homeowners' Loan Program (EHLP)" are designed to help offset the cost of current or missed mortgage payments, including principal, interest, taxes, insurances, and other costs.

Homeowners who qualify for the $1 billion EHLP program must be facing foreclosure because of unemployment or reduced employment, and can demonstrate the loan will help resume mortgage payments down the road.

The federal program is expected to help an estimated 30,000 distressed homeowners. The application deadline was originally set to expire on July 22, but was extended to July 27. The latest deadline is Sept. 15, 2011. EHLP, authorized by the "Dodd-Frank Wall Street Reform and Consumer Protection Act," extends nationwide an existing $7.6 billion federal assistance program for unemployed or under-employed homeowners. Called the "Hardest Hit Fund," the program originally was state-administered in 18 states and the District of Columbia, areas hit hardest hit by the housing crisis.

The new EHLP will offer federal assistance to homeowners in 27 additional states and Puerto Rico. Five more states will administer their own variety of the new EHLP.

Here's how to get help from EHLP

• To qualify, you must be a homeowner who has experienced a decrease in income of at least 15 percent due to "involuntary unemployment or under-employment" related to economic conditions and/or a medical emergency.

• Under your current, reduced income, you must document that your monthly mortgage payment is more than 31 percent of your monthly income.

• In fiscal years 2008 through 2010, prior to the loss of income, your total household income cannot have been more than the greater of $75,000 or 120 percent of your Area Median Income (AMI) for a household of four persons. Income includes wages, salary, and self-employed earnings and income.

• With loans expected to average $35,000, but not exceed $50,000, EHLP will pays up to 69 percent of your monthly mortgage, including missed mortgage payments or past due charges, including principal, interest, taxes, insurances, and attorney fees. You must be able to contribute 31 percent of your monthly income for the mortgage payment at the time of application, but not less than $150 per month. Payments go directly to the lender.

• After an assistance period of up to two years, the government will forgive 20 percent of the loan each year. You won't have to pay anything back if you remain current on your mortgage and stay in your home for at least five years after the assistance period.

• You can have a second mortgage, but EHLP loans will be applied only to your first mortgage for your primary residence only. You must reside in the residence, which can be a single-family home in a one- to four-unit structure, including a condo or a co-op. Second homes are not eligible.

• You must have been at least three months delinquent on mortgage payments, as of June 1, 2011 and have received a written notice (often referred to as a "breach letter") from your lender or servicer stating that your are at least 60 days late and at risk of foreclosure.

You won't qualify if your foreclosure date is less than 30 days away when you apply.

• You must also prove you have a history of good mortgage payments prior to the income reductions. You cannot have been 60 days late more than once on the first and/or second mortgage in the 24 months immediately before becoming unemployed or underemployed.