End of Mortgage Assistance Could Undermine Economic Recovery

A blog post by Mark Price, originally published at Third and State.

Economic forecasters predicting strong economic growth in the next several years rest those hopes on a robust recovery in residential construction. In light of that, The Philadelphia Inquirer has some troubling news this morning in a story about a surge in foreclosure filings over the last 12 months.

The rise in foreclosure filings may be the result of lenders moving forward with long planned foreclosures rather than a worsening of economic conditions. More troubling is the rise in 90-day delinquencies, which could be the result of the end of Pennsylvania’s Homeowners Emergency Mortgage Assistance Program (HEMAP). The permanent end to HEMAP also means rising costs for future taxpayers.

The rise in 90-day delinquencies in Pennsylvania during 2011 coincided with the end of the state’s highly touted Homeowners Emergency Mortgage Assistance Program (HEMAP), which provided loans to borrowers behind on their mortgages that were repaid either when their financial crises ended or within 24 months.

In 2010, 13,654 homeowners applied for the assistance, and 2,798 were approved, said John Dodds, director of the Philadelphia Unemployment Project.

“All of those who applied were informed of housing counseling, and many probably had their mortgage modified or were otherwise able to save their homes,” Dodds said Wednesday.

Funding for HEMAP, which began in 1983, ended in August, as did the Act 91 requirement that defaulting borrowers be sent notices by lenders informing them of the program and available counseling assistance, Dodds said.

For part of 2011, he said, the federal Emergency Homeowner Loan Program, which was modeled on HEMAP, funded these emergency loans. That Housing and Urban Development-funded program, which the Pennsylvania Housing Finance Agency administered, ended Sept. 30, after approving 3,056 homeowners for emergency help.

“Without these programs, the increase in foreclosures would have been greater, and since Sept. 30 no direct-aid program has been available in Pennsylvania,” Dodds said.

Last week, Gov. Corbett included no funding for HEMAP in his proposed 2012-13 budget.

The Inquirer goes on to note that a research brief published by the Reinvestment Fund found that HEMAP kept more than 6,100 homeowners out of foreclosure from 2008 to 2010. Without the program, the report said, “Pennsylvania’s foreclosure rate would have been higher and its rank among states several rungs worse.”

Again, The Inquirer:

Government estimates show that the costs of foreclosures are shared among lenders (64.6 percent), local government (24.7 percent), homeowners (9.2 percent), and neighbors, whose homes also lose value because of proximity to a bank repossession (1.9 percent).

By reducing Pennsylvania’s foreclosure rate by 6,100 homes, the report estimates, $480 million was saved – $170 million of that in Philadelphia and its four suburban counties.

Higher Tuition, More Foreclosures: Just Some of the Ways We Are Paying the Price of Service Cuts

Price of Service CutsLast week, the Pennsylvania Budget and Policy Center launched a new series about the impact of five years of state service cuts on the citizens of Pennsylvania. Check out the first three installments below, and keep up with all the stories in the days and weeks ahead by liking our Facebook Page or bookmarking our Price of Service Cuts web page.

End to Mortgage Aid Nearly Cost Pennsylvania Woman Her Home

Judy earned a modest income from her clerical job until an unexpected health problem hit. She needed to work to pay her mortgage, but her doctor and physical therapist told her she had to take time off to recover. Judy, who lives in Allegheny County, went five months without income and fell behind on her mortgage payments. She faced the awful prospect of losing her home. …

When Judy turned to the Homeowners’ Emergency Mortgage Assistance Program (HEMAP) for help, she hit a wall. Funding for HEMAP was cut so deeply in the 2011-12 state budget (by $8.5 million or over 80% from the previous year) that the Pennsylvania Housing Finance Agency had no choice but to shut HEMAP down in July 2011. Read the full story.

Fewer Places to Turn for Victims of Domestic Violence

After suffering abuse, Michelle went with her two young girls (2 and 6 years) to SafeNet, a domestic violence program in Erie. SafeNet’s emergency shelter was over capacity but made room for Michelle and her children. SafeNet offered Michelle and her children a safe place to stay and counseling. Staff and volunteers put in extra effort working with the children, unwitting victims who are often confused and traumatized by the violence they have witnessed, to assure their physical and emotional well-being.

Domestic violence shelters can only provide 30 days of shelter for victims, but Michelle needed more time to find permanent housing and get back on her feet. SafeNet continued to work with Michelle, but could no longer provide shelter because of limited funding. …

Funding for domestic violence services in the commonwealth has been stagnant or decreasing over the last 11 years, while the operational costs of providing shelter and counseling have skyrocketed. The recession and high rate of unemployment, while not causes of domestic violence, are tied to an increase in both the frequency and severity of reported cases. With less funding, fewer victims are getting the help they need. Read the full story.

Drowning in Debt: Budget Cuts Raise Cost of College

Brittany graduated from Shippensburg University last year with $60,000 in student loans. She is thankful, however, because her communications degree did land her a job in New York where she commutes every day from Bucks County. Others are not so fortunate. Zachary invested in a five-year architecture/landscape program at Pennsylvania State University, and it has yet to pay off. After graduating, Zachary settled for a manual-labor landscaping job that has since ended. He is eager to work and has a career of academic achievement but simply cannot find a job.

These stories are not unique. Today, many young graduates are left holding a diploma but not a job after pouring time and money into a college education. As a result, more graduates are defaulting on their student loan payments each year. …

State support of higher education has been cut dramatically in the past few years. …

Behind the mortgage, the cost of college is often a family’s largest investment, and it is becoming increasingly unaffordable. Read the full story.

An Overview of Pennsylvania’s 2011-12 State Budget

( – promoted by John Morgan)

State legislative leaders and Governor Tom Corbett agreed on a 2011-12 state budget deal this week, and on Tuesday, the state Senate approved it on a 30-20 party-line vote. The bill heads to the House of Representatives next.

It would spend just $27.2 billion, down $962 million, or 3.4%, from the 2010-11 budget.

The Pennsylvania Budget and Policy Center will have a detailed analysis of the budget later in the week, but for now we will highlight funding levels for major programs. You can view budget tables detailing funding levels by major department and highlights of education funding levels.


The biggest cuts, in both dollars and percentages, are in education programs, including PreK-12 and higher education. While the budget makes some funding restorations from the Governor’s original budget proposal, the cuts are still significant:

  • Basic education funding, at $5.35 billion is cut $421.5 million, or 7.3%, from the current year.
  • Funding for Accountability Block Grants, at $100 million, is cut by $159 million, or 61%.
  • Special education is flat-funded for the third year at just over $1 billion.
  • Charter School reimbursements are fully eliminated (a loss of $224 million).
  • Funding was also eliminated for Educational Assistance (a tutoring program) and school improvement grants.
  • Both Head Start and PreK Counts were cut by about 3%.

The cuts in major education programs total $863 million.

Higher education fared much better under the final budget but still sustained cuts of about 18%, or $160 million. Penn State University received a cut of 19%, or $50 million, in basic support. Community colleges will see a 10% cut, or $23.6 million.

Health Care and Public Welfare

Total spending in the Department of Public Welfare fell by just 0.4% from current expenditure levels, but that number masks reductions in health care and other services for vulnerable Pennsylvanians.

Funding was cut for Medical Assistance-Outpatient ($24.4 million) and for Medical Assistance-Capitation ($12.7 million). Funding for Medical Assistance-Inpatient was increased $18.5 million. The Medical Assistance Transportation Program was cut $8.5 million.

Funding for county child welfare was cut by 4%, or $45 million. Child care funding is cut by 10%, or $35 million. $3.3 million was restored for community-based family centers, which saw all $6.3 million of their funding erased in the Governor’s budget.

Cash grants were cut by 16%, or $44 million. Funding for the TANF job training and support program – New Directions – was just about cut in half to $17.2 million.

Behavioral health funding was cut by 10%. or $5.3 million. Funding for health care clinics was cut from $2.5 million down to $1 million.

Housing and Other Services

The Governor’s budget had zeroed out more than $23.5 million provided through the Human Services Development Fund to give counties flexible funds for human services such as housing assistance, adult day care, home delivered meals and transportation services. The final budget restores the fund to $14.9 million, still a cut of $8.5 million.

The Homeowners Emergency Mortgage Assistance Program is cut from $10.5 million down to $2 million. $17.8 million for housing and redevelopment assistance is gone.

Detailed Budget Analysis to Come

The Pennsylvania Budget and Policy Center will put out a more detailed budget analysis later in the week. Check our web site for updates.

Saving Main Street

After spending hundreds of billions bailing out Wall Street people on Main Street continue asking for help.  As unemployment continues upward pressure on foreclosures is unabated.  Part of the allure of the Tea Baggers is the frustration at little help to families and working people trying to make ends meet.  A few programs have helped, extension of unemployment benefits, extensions of COBRA health care as proposed by people like Joe Sestak, the help lines espoused by Congressman Paul Kanjorski and the Mortgage Modification Program by the treasury Department.  The last one has been wholly unsuccessful however.  Until bankruptcy judges are given authority to amend mortgage terms people will continue losing homes unnecessarily.

The foreclosure crisis still is undermining our recovery and must be addressed.  Yesterday the White House announced changes to the program in an attempt to make it successful.  So far only a fraction of the mortgages expected to be amended have happened.  Meanwhile too many Americans are frustrated at red tape, paperwork and regulations.  Wall Street gets hundreds of billions with no strings attached but homeowners are forced to jump through hoops while paying bonuses to more banking executives.  This is a political time bomb.

It seems the Obama Administration sees this and is trying to streamline the process, especially going after mortgage servicing companies:

The Mortgage Modification Conversion Drive will include the following:

   * Servicer Accountability. As part of the Administration’s ongoing efforts to hold servicers accountable for their commitment to the program and responsibility to borrowers, the following measures will be added:

         o Top servicers will be required to submit a schedule demonstrating their plans to reach a decision on each loan for which they have documentation and to communicate either a modification agreement or denial letter to those borrowers. Treasury/Fannie Mae “account liaisons” are being assigned to these servicers and will follow up daily as necessary to monitor progress against the servicer’s plan.  Daily progress will be aggregated by the end of each business day and reported to the Administration.

         o Servicers failing to meet performance obligations under the Servicer Participation Agreement will be subject to consequences which could include monetary penalties and sanctions.

         o The December MHA Servicer Performance Report will include the data on permanent modifications as well as the number of active trial period modifications that may convert by the end of the year if all borrower documents are successfully submitted, sorted by servicer and date.

         o Servicers will be required to report to the Administration the status of each modification to provide additional transparency about situations where borrowers face obstacles to moving to the permanent phase.

   * Web tools for borrowers. Because the document submission process can be a challenge for many borrowers, the Administration has created new resources on www.MakingHomeAffordable.gov to simplify and streamline this step. New resources include:

         o Links to all of the required documents and an income verification checklist to help borrowers request a modification in four easy steps;

         o Comprehensive information about how the trial phase works, what borrower responsibilities are to convert to a permanent modification, and a new instructional video which provides step by step instruction for borrowers;

         o A toolkit for partner organizations to directly assist their constituents;

         o New web banners and tools for outreach partners to drive more borrowers to the site and Homeowner’s HOPETM Hotline (888-995-HOPE).

   * Engagement of state, local and community stakeholders. Through the conversion drive, the Administration is engaging all levels of government – state, local and county – to both increase awareness of the program and expand the resources available to borrowers as they navigate the modification process.

         o HUD will engage staff in its 81 field offices to distribute outreach tools.  HUD will also encourage its 2700 HUD-Approved Counseling Organizations to distribute outreach information to participating borrowers.

         o By engaging the National Governors Association (NGA), National League of Cities (NLC) and National Association of Counties (NACo) the Administration is connecting with the thousands of state, local, and county offices on the frontlines in large and small communities across the country who are hardest hit by the foreclosure crisis. These offices will now have the tools to increase awareness of the program, connect with and educate borrowers and grassroots organizations on how to request a modification and take the additional steps to ensure they are converted to permanent status; and serve as an additional trusted resource for borrowers who are facing challenges with the program.

         o In partnering with the Conference of State Bank Supervisors and the American Association of Residential Mortgage Regulators, state regulators will now have enhanced tools to assist borrowers who are facing challenges in converting to a permanent modification and to report to the Administration on the progress and challenges borrowers and servicers are facing on the ground. Regulators will also be empowered to work directly with escalation and compliance teams to ensure that HAMP guidelines are consistently applied.