Illinois Hardest Hit Fund aims to assist 15,000 unemployed homeowners
Solutions to the foreclosure crisis have been notoriously difficult to pin down, in part because the forces that drive foreclosure are diverse and changing. Some borrowers are under duress because their monthly payments have grown substantially. Others owe more on their homes than they are worth or have lost their incomes due to unemployment. Each situation requires different types of interventions to effectively prevent foreclosure whenever possible. The majority of government interventions thus far have focused on helping homeowners whose payments have become unaffordable. The Illinois Housing Development Authority (IHDA) recently launched a $445.6 million program that’s designed to help the third group—people struggling with their mortgage payments due to a significant loss of income.
The Hardest Hit Fund, funded by the U.S. Department of Treasury, offers struggling homeowners a 10-year forgivable loan for up to $25,000 to bring their mortgages current by paying arrearages, penalties, and fines, as well as regular monthly mortgage payments. Programs like the Home Affordable Modification Program (HAMP), which focus on making monthly payments more affordable, aren’t tailored to the needs of borrowers who have experienced a dramatic drop in income and cannot afford to make even reduced monthly payments. With unemployment rates reaching nearly 10 percent in Illinois, a program like HHF is badly needed to help keep families in their homes while they look for work. Community interest has been substantial—IHDA has already received more than 15,000 applications, mostly from the Chicago area. The program is projected to help 15,000 homeowners stay in their homes.
“If we can keep people in their homes, we have a better chance of keeping neighborhoods stable,” says Ronald Litke, Director of Communications at IHDA.
In order to use HHF funds effectively, IHDA developed a set of eligibility requirements to target “people who seem like they have a good chance of getting back on their feet,” according to Litke. Homeowners must have experienced an income reduction of 25 percent or more due to un- or under-employment through no fault of their own. Homeowners’ incomes must be at or below 120 percent of area median income, and the principal loan balance of the mortgage cannot be more than $500,000. Only homeowners with fixed- or adjustable-rate mortgages are eligible for the program—interest-only or negatively amortizing loans would not be eligible, for example. Homeowners can apply for the program for free and learn about all eligibility requirements at the Hardest Hit Fund’s website. Ineligible homeowners who apply for the program will work with counselors to seek out other options and can appeal the decision.
Some foreclosure prevention programs have been dogged by a drawn-out application process. The administrators of HHF hope to avoid that fate. IHDA expects the process from application to decision to take around 90 days. IHDA will also promote accountability for the Hardest Hit Fund by participating in Governor Quinn’s open data efforts and by working with the Treasury Department to simultaneously publish quarterly HHF reports on the websites of both agencies.
IHDA is partnering with a network of 68 housing counselors and other non-profit partners to spread the word about the Hardest Hit Fund and help homeowners through the process. Every applicant can choose a counseling agency to work with or have one assigned to them. IHDA is paying agencies $950 per approved application: $650 for the application, and $300 for closing costs, as well as providing them guidance on media outreach and promotion.
As unemployment levels continue to remain high, job loss will still be a significant driver of foreclosures in the Chicago region and throughout the state. Programs like HHF offer the opportunity to help homeowners through a rough patch, keep homes from becoming vacant, and help stabilize neighborhoods.