Homeowners facing foreclosure may apply for federal, interest-free loans that would pay monthly mortgage bills for up to two years or up to $50,000, whichever comes first.
The Emergency Homeowners' Loan Program has been rolled out by the U.S. Department of Housing and Urban Development and NeighborWorks America, a network of 225 community development nonprofits across the nation.
A $1 billion allocation is set to relieve up to 30,000 households nationwide, money that will also go to pay off other past due charges, such as taxes, attorney fees and insurance, HUD officials said. Loan payments would be sent directly to the lenders.
The help is for homeowners whose income has dropped at least 15 percent from 2009 levels due to layoffs, reduced earnings or medical emergencies. Also, they must be at least three months late and the monthly mortgage bill exceed 31 percent of their monthly income.
Under eligibility rules for Long Islanders, the maximum household income is $124,300.
Homeowners must first fill out a worksheet and send it to a HUD-approved nonprofit participating in the program. That deadline is July 22. The nonprofit will then contact those who meet the criteria to fill out the formal application. There is no charge for the nonprofit help.
"It's a $50,000 lottery ticket for those who get it." said Michael Smith, president of SafeGuard Credit Counseling Services in Hauppauge, one nonprofit in the program. "It's a home run."
When it comes to getting mortgage relief, jobless homeowners probably face the most extreme challenge. Lenders see little benefit in improving loan terms for borrowers who have no income.
While the federal Home Affordable Modification Program for borrowers has a limited plan to help the jobless, Smith said it's not been working well. "HAMP relies on the banks to have their act in gear," he said.
But in this latest rescue plan, HUD officials will decide who gets the help.
Qualifying for free loans will not be easy, Smith said.
One big hurdle: Borrowers must not be delinquent on any federal debt, such as income taxes.
Smith said many people who fell behind on mortgages took money out of their 401k accounts, and because that's considered income, it's taxed. But those borrowers, already struggling, could not pay the federal taxes, he said.
Also, borrowers in bankruptcy or in a loan modification program are not eligible.
Homeowners who pass a long list of criteria will still have to help pay $150 monthly on their mortgages or 31 percent of their income, whichever is greater.
For details, applications and nonprofits participating in the program, go to findehlp.org or call 1-855-346-3345.