It seems like only yesterday that losing your job and missing a bunch of mortgage payments meant you were one step closer to homelessness. Not anymore.
Likely beginning this month, homeowners who have experienced a substantial loss of income due to layoffs and cut-backs, as well as those who’ve suffered a medical condition, and have missed at least three mortgage payments in a row, are eligible to apply for an interest-free government loan for up to $50,000 to cover their mortgage for as long as two years.
The program is part of the Dodd-Frank Wall Street Reform and Consumer Protection Act, signed into law by President Obama in July, that authorizes the Department of Housing and Urban Development (HUD) to administer a $1 billion Emergency Homeowners Loan Program to struggling homeowners across the country. HUD will provide $46,627,889 to help homeowners in Virginia, specifically. This number is based on Virginia’s approximate share of unemployed homeowners with a mortgage relative to all unemployed, mortgage-holding homeowners in the nation.
The loan allows borrowers to pay their mortgage and other related bills, such as mortgage interest, mortgage insurance premiums, taxes and hazard insurance.
To be eligible, borrowers must be able to prove past income and show at least a 15 percent drop in income due to a layoff, wage cut or a medical condition. They must be at least 90 days late in their monthly payments and be able to show proof of a good payment history (i.e. they could afford the monthly payments at one point) prior to the event that triggered the reduction in income. The property must be the primary residence and eligible borrowers cannot own a second home. Finally, they must show a “reasonable likelihood” of being able to repay the loan after two years.
The most intriguing part: If the borrower stays current with monthly payments once the loan is secured and maintains the property as the primary residence for five years, the balance of the HUD loan is waived.
But beware—there are a few events that would trigger HUD to seek repayment of the emergency loan through a lien on the property:
• The property isn’t the primary residence
• The homeowner defaults on his or her portion of the current mortgage
• The homeowner sells or refinances debt on the home
For more information, visit www.hud.gov.—Jessie Knadler