Emergency Homeowner Loan Program – Home Mortgage Bail-Out Program

by Ryan Guina

The US Department of Housing and Urban Development (HUD) recently announced a new program designed to assist homeowners who can’t make their mortgage payments due to underemployment, unemployment or recent medical condition. The Emergency Homeowner Loan Program (EHLP) will provide qualified applicants interest free loans of up to $50,000 to help recipients pay their mortgage, property taxes, and/or insurance premiums for up to the next two years. And depending on the borrower’s financial circumstances throughout the program, the loan may be forgiven in full.

How the Emergency Homeowner Loan Program Works

The Emergency Homeowner Loan Program is an interest free, forgivable, five year loan, designed to help homeowners who have experienced a substantial drop in income (more than 15%) due to a job loss or medical condition. Homeowners who are approved for the program can receive a one-time payment from EHLP to bring them current on their loans, in addition to monthly payments to help them stay current. the goal is to prevent foreclosures or from homeowner’s walking away from their mortgages.

Recipients of the Emergency Homeowner Loan Program loans will be required to make a monthly payment toward their mortgage at the rate of 31% of their income, or $150, whichever is greater. The EHLP then kicks in the rest of the mortgage payment. Emergency Homeowner Loan Program benefits last up to 24 months, or until the borrower exhausts the $50,000 loan limit.

Borrowers will not be required to make payments on the loan as long as they continue to meet the program eligibility requirements and remain current on their mortgage payments. If the homeowner continues to meet the program requirements the principal loan balance will decrease by 20% of the original loan value each year. If at the end of the 5 year loan period, the homeowner still meets the requirements, the loan will be forgiven.

How to Qualify for the Emergency Homeowner Loan Program

The first requirement is residency – the EHLP is only available to residents of 32 states not included in the Treasury’s Innovation Fund for Hardest Hit Housing Markets. The next requirement is to have experienced a minimum of a 15% decrease in income that stems from a job loss or serious illness, and which puts you at risk of losing your home.

Here are additional eligibility requirements:

  • Income Limit: Total household income prior to the underemployment, unemployment, or medical condition must be equal to or less than greater of $75,000 or 120 percent of the Area Median Income (AMI) for a household size of four persons.
  • Mortgage Delinquency: Must be at least three months delinquent on mortgage payments.
  • Probability of Foreclosure: Applicant must have received notification of intention to foreclose on their mortgage from their lender.
  • Ability to Resume Payment: Applicant must submit evidence supporting their ability to resume mortgage payments and all other household debt obligations if their income rises above 85% of the previous level.
  • Principal Residence: The property must be the applicant’s primary residence at the time of application and throughout the duration of the loan period.

Here are the 32 states where EHLP is available:

Alaska, Arkansas, Colorado, Hawaii, Iowa, Kansas, Louisiana, Maine, Massachusetts, Minnesota, Missouri, Montana, Nebraska, New Hampshire, New Mexico, New York, North Dakota, Oklahoma, South Dakota, Texas, Utah, Vermont, Virginia, Washington, West Virginia, Wisconsin, and Wyoming. EHLP is also offered in Puerto Rico.

Visit the HUD EHLP requirements page for more eligibility information.

Limited Funds and a Quick Turnaround

You must act quickly if you believe you may be eligible for this program. The government only earn-marked $1 billion for this program, and it is sure to go quickly. Additionally, the deadline is right around the corner: pre-screening applications must be received by July 22, 2011.

What are your thoughts on the Emergency Homeowner Loan Program?

Published or updated July 24, 2011.
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