April 6, 2009



State and Federal Mortgage Assistance Programs


By: Jillian L. Redding, Legislative Fellow



You asked for a report on state and federal programs available to assist residents in paying their mortgages.  This report updates OLR Report 2008-R-0516.




The 2008 Housing and Economic Recovery Act created the HOPE for Homeowners program, which is administered by the Federal Housing Authority (FHA).  This program allows certain borrowers facing difficulty repaying their mortgage to refinance into FHA-insured mortgages they can afford. 


The 2009 Homeowner Affordability and Stability Plan established the Making Home Affordable program, which is administered by the U.S. Department of Treasury.  The program offers two options for homeowners having difficulty repaying their mortgage: the Home Affordable Refinance program and the Home Affordable Modification program.  These programs offer access to (1) low-cost refinancing for qualified borrowers with conforming loans owned or guaranteed by Fannie Mae and Freddie Mac and (2) a $75 billion homeowner stability initiative to prevent foreclosures. 


Connecticut Public Act 08-176, passed in 2008, authorized several foreclosure prevention programs.  The Connecticut Fair Alternative Mortgage Lending Initiative and Education Services (CT FAMILIES) and the Homeowner’s Equity Recovery Opportunity (HERO) programs provide refinancing opportunities for qualified buyers.  The Emergency Mortgage Assistance Program (EMAP) provides temporary loans for mortgage payments.  All three programs are administered by the Connecticut Housing Finance Authority (CHFA).  The act further required The Workplace, Inc. to establish a mortgage crisis job training program to provide job training and job placement assistance to borrowers who are unemployed, underemployed, or need a second job.  Additionally, the chief court administrator established a judicial mediation plan, as required by the act.


There are currently two bills pending, House Bill 6481 and Senate Bill 619, that, if passed, would modify some of the Connecticut programs. 




The Housing and Economic Recovery Act, Public Law 110-289, was passed on July 30, 2008.  It created the HOPE for Homeowners program.  It is effective from October 1, 2008 to September 30, 2011.


In February 2009, President Obama introduced the Making Home Affordable program, which authorized the Home Affordable Refinance program and the Home Affordable Modification program.  The Home Affordable Refinance program expires on June 10, 2010 and the Home Affordable Modification program expires on December 31, 2012.


HOPE for Homeowners Program


This program’s goal is to reduce principal and interest payments for eligible borrowers by allowing them to refinance into fixed rate 30-year FHA-insured loans based on current property values. Lender participation is voluntary.  Eligible mortgages must have been originated by January 1, 2008. Borrowers must certify that they:


1. have a mortgage debt-to-income of at least 31%,

2. are unable to afford their current loan,

3. have not intentionally missed mortgage payments,

4. do not own second homes, and

5. have not been convicted of mortgage fraud.


Additionally, they must certify that the mortgaged property is their primary residence, and is a single-family home (one to four units).

Original lenders must agree to:


1.   pay a 3% one-time insurance fee to FHA;


2.   write down the mortgage to achieve a 90% loan-to-value ratio, if necessary;


3.   waive prepayment penalties on the existing mortgage; and


4.   release all existing claims, such as second mortgages.


The new loan may not exceed 90% of the property’s current appraised value.  The maximum loan amount is 132% of the Freddie Mac limit.  The program is effective from October 1, 2008 through September 30, 2011.  The Congressional Research Service's full summary of the law can be found at http: //assets. opencrs. com/rpts/RL34623_20080819. pdf.  


The Making Home Affordable Program


This federal program offers two options for mortgage applicants and seeks to make mortgages more affordable and prevent foreclosures.  Lender participation is voluntary.  The two options for homeowners are the Home Affordable Refinance program and the Home Affordable Modification program.  Investors and lenders are provided incentives for participating in the Making Home Affordable program.  More information on the programs is available at http://www.realtor.org/government_affairs/gapublic/homeowner_afford_stability_plan.  The Making Home Affordable website refers homeowners to contact (888) 995-HOPE.


The Home Affordable Refinance Program. This program is for applicants whose existing mortgage is owned by Freddie Mac or Fannie Mae and who have not missed any mortgage payments.  Normally, they would be ineligible to refinance because their homes have decreased in value.  The program allows them to refinance into a more stable and affordable fixed-rate loan. The program is in effect until June 2010.


The Home Affordable Modification Program. This program assists homeowners who are at-risk and may have already missed a mortgage payment.  However, payment delinquency is not a criterion for eligibility.  Modifications may start immediately and continue until December 31, 2012, and loans may be modified only once.  The Treasury will partner with the financial institution and investors to reduce a homeowner’s monthly mortgage payments.  Criteria for eligibility in this program include the following:


1.   the loan must have been originated on or before January 1, 2009;


2.   the owner must occupy the property;


3.   the first-lien loan has an unpaid balance of up to $729,750;


4.   the mortgage payment is more than 31% of the homeowner’s gross monthly income; and


5.   the applicant must sign an affidavit of financial hardship.


Only the homeowner’s first mortgage is eligible for modification under this program. 




Public Act 08-176 specifically authorized the CT FAMILIES, HERO, and EMAP programs, which are administered by CHFA.  The act further required (1) The Workplace, Inc. to establish a mortgage crisis job training program and (2) the chief court administrator to establish a judicial mediation plan by July 1, 2008.  For more information on these programs, homeowners may visit www.chfa.org or call (860) 721-9501.




Under this program, eligible homeowners may qualify for a fixed-rate 30-year CT FAMILIES loan if they have an adjustable rate mortgage (ARM), whether current or delinquent, or a fixed rate current mortgage, and the mortgage is no longer suitable for their financial situation.  Delinquency must result from interest rate and payment increases or a financial hardship due to extenuating circumstances, such as job loss or an uninsured medical emergency or procedure.  The interest rate for this loan is the same as the CHFA Regular Homebuyer program rate.  (To find current information on rates, see www.chfa.org.)


Until December 2008, the CT FAMILIES loans were insured through HUD’s FHASecure program.  HUD eliminated this program on December 31, 2008.  On February 26, 2009, CHFA authorized the modification of the CT FAMILIES program to allow CHFA to insure CT FAMILIES loans.  There are currently seven participating lenders originating these loans. 


On March 6, 2009, CHFA held a meeting with these lenders to discuss the program change.  On March 13, 2009, CHFA held a meeting with HUD-approved counseling agencies. 


The agencies are implementing training sessions for loan originators and underwriters for each participating lender.  The program will begin accepting applications again when this training is complete.


HERO Program


HERO is a loan program designed to improve the financial situation of Connecticut homeowners who cannot afford current mortgage payments.  The program provides fixed-rate mortgages for up to 30 years, as determined by CHFA, and include property taxes and insurance in the borrower’s monthly payments.  CHFA purchases the mortgage from a lender on terms that allow CHFA to set up payment terms affordable to the homeowner.  CHFA determines the interest rate and services the mortgage.  


Borrowers are eligible if the HERO loan is in the first lien position and they have:


1.   made an effort to meet their financial obligations to the best of their ability;


2.   sufficient and stable income to support timely repayment of the loan;


3.   legal title to the mortgaged property and live there as a permanent residence; and


4.   the ability to account for cash flow if they have stopped making monthly payments by showing how the funds were escrowed, saved, or redirected.


Generally, applicants denied CT FAMILIES and EMAP loans are reviewed for HERO loans.  Borrowers must fully disclose to CHFA all assets and liabilities, whether singly or jointly held, and all household income, regardless of source.


CHFA must determine a borrower’s eligibility within 30 days of receiving an application.  All approved borrowers must attend in-person financial counseling at a CHFA-approved agency.  


According to CHFA, only one HERO loan has been approved since the program was implemented last year.


Emergency Mortgage Assistance Program


EMAP provides emergency mortgage assistance payments to eligible homeowners.  It was implemented on July 1, 2008.  The act provided funding for EMAP loans.  EMAP is not available for FHA-insured loans.


Lender participation in the program is voluntary.  However, a lender must comply with the EMAP statute if it wants to foreclose on a mortgage on a one-to-four family owner-occupied residence if the property is not FHA insured and the borrower:


1.   has not mortgaged the property for commercial or business purposes,


2.   has not previously received EMAP assistance (except if the person has reinstated the mortgage and has not been delinquent for six consecutive months since the reinstatement), and


3.   is not in default under the mortgage, except for the monetary delinquency.


This means the lender must send a notice to the borrower stating that he or she has 60 days to (1) have a conference with the lender or a face-to-face meeting with a credit counseling agency to attempt to resolve the default and (2) contact CHFA about EMAP if he or she is  unsuccessful in doing so.  If the borrower fails to comply with the deadlines or CHFA fails to approve the EMAP application within 30 days of its filing, the foreclosure proceeding can continue.  EMAP participants can still exercise their rights under the foreclosure mediation program under the law, but the concurrent exercise of those rights cannot delay the EMAP eligibility determination.


Applications. Since the program’s implementation in July 2008, CHFA has received 524 applications.  Of those, 54% were ineligible for the program for several reasons, including:


1.   a foreclosure date prior to July 1, 2008,


2.   the hardship claimed did not result in at least a 25% reduction in aggregate monthly household income,


3.   the delinquent mortgage payments exceeded program guidelines,


4.   the hardships claimed were not eligible hardships under the program, or


5.   the property was an investment property and not owner-occupied. 


Another 44% of the applications were denied because (1) there was no reasonable expectation that the applicant would be able to resume full mortgage payments within 60 months and repay the EMAP loan, (2) the homeowner’s current monthly housing expense was less than or equal to 35% of his or her aggregate household income, or (3) the loan applicants failed to provide additional information requested by CHFA to process the applications.


Eighty-eight applications are currently being underwritten to determine their eligibility for EMAP, and 23 are awaiting the results of judicial mediation to determine if EMAP assistance will be required.  As of March 12, 2009, 20 EMAP loans have been approved that will provide monthly assistance to homeowners.  Five loans are being provided in conjunction with lender mortgage modifications.  In addition to the monthly assistance, EMAP will pay the mortgage arrearages.


The Workplace, Inc. Mortgage Crisis Job Training


The WorkPlace, Inc. is southwestern Connecticut's regional workforce development board.  It, in conjunction with the other regional workforce development boards and one-stop centers, has established a mortgage crisis job training program.  The goal of the program is to provide rapid, customized employment services, job training, repair training, and job placement assistance to borrowers who are unemployed, underemployed, or in need of a second job.  The WorkPlace, Inc. must coordinate with CHFA to provide financial literacy and credit counseling for program participants.


Borrowers are eligible for the program if they are at least 60 days delinquent on their mortgages and (1) are referred by their CHFA lender or (2) demonstrate an imminent need to increase earnings in order to avoid delinquency or foreclosure. Borrowers can also access the program through the one-stop centers.


For more information, homeowners may visit workplace.org or call (203) 576-7030.


Judicial Mediation Plan


This program is available to owner-occupants of one-to-four family residential real property in Connecticut who are also borrowers under a mortgage encumbering the property and who use the property as their primary residence.  The program must address all issues of foreclosure and be conducted by trained foreclosure mediators.


If a lender starts a foreclosure action on a one-to-four family dwelling occupied as a residence by a borrower with a foreclosure complaint return date on or after July 1, 2008, it must give notice of the foreclosure mediation program to the borrower by attaching to the front of the foreclosure complaint (1) a notice of the availability of the foreclosure mediation program and (2) a foreclosure mediation request form. This applies to a lender, including the original lender or servicer under a mortgage or its successors or assigns.  This requirement is in effect until July 1, 2010.


Borrowers can request mediation by submitting the form to the court and filing an appearance within 15 days of the return date. No requests can be accepted on or after July 1, 2010, and the program ends when mediation for applications submitted prior to that date have concluded. A court cannot enter a judgment of strict foreclosure or foreclosure by sale if a borrower has submitted a timely request for mediation and the mediation period has not expired.  The act specifies that it does not require the lender to modify the mortgage or change the terms of payment without its consent. Additionally, determinations issued by mediators cannot form the basis of an appeal of any foreclosure judgment.


Between July 1 and December 31, 2008, 11,818 foreclosure cases were filed.  Of those, 9,185 cases were eligible for judicial mediation.  Only 31%, or 2,859 homeowners, requested judicial mediation.