The federal government is attempting to help turn around the struggling housing market and reduce the number of home foreclosures. The Emergency Homeowners Loan Program will help homeowners who are behind on their mortgage and struggling to make payments. Loans of up to $50,000 will be available to the unemployed. Additionally, the loans do not require repayment if certain conditions are met.
The purpose of this loan program is to provide assistance to people who will only need it short-term. The loans offered will last up to two years, borrowers will not be charged interest, and funds will go to the mortgage lender to cover monthly payments and late fees. The loans will be forgiven at a rate of 20% per year. Therefore, a homeowner who stays in their home for five years and stays current with their mortgage will not have to repay the loan. To qualify for the program, borrowers must be in danger of foreclosure and have experienced a loss of income. The program will cost $1 billion.
Critics of the program say that homeowners will be at risk for incurring additional debt. If borrowers do not stay current with their mortgage or sell the home before the loan is completely forgiven, they will be responsible for the loan. However, supporters of the program do not think the program will help enough people. Approximately 4 to 4.5 million homeowners are in foreclosure or at least 90 days behind on their payments. The Emergency Homeowners Loan Program will only provide assistance to about 30,000 people.
Annamaria Andriotis, More Money for Struggling Homeowners,
https://www.smartmoney.com/spend/real-estate/more-money-for-struggling-homeowners-1309312646029/ (accessed June 29, 2011).