DETROIT – State leaders are calling on credit unions and banks to help troubled homeowners in a new program that will funnel $154 million in Troubled Asset Relief Program, or TARP, funds to local lenders in an effort to keep troubled borrowers in their homes.
"Our state's biggest challenge is sustaining homeownership for unemployed and underemployed borrowers," said David Adams, president of the Michigan CU League, of the so-called Hardest-Hit TARP funds, which also are being disbursed to the four “Sand States” (California, Nevada, Arizona and Florida).
"Michigan is in the midst of an historic remaking of our economy," Adams said. "Our state’s biggest challenge is sustaining homeownership for unemployed and underemployed borrowers. This plan provides a blueprint for how Michigan credit unions, banks and policymakers can work together to help those who need assistance while transitioning to the 21st century economy."
Michigan’s Hardest-Hit plan is aimed at homeowners who are receiving unemployment benefits, have fallen behind in their mortgage payments or no longer can afford their mortgage payments. It was developed in partnership with the Michigan CU League, Michigan Bankers Association, Michigan Association of Community Bankers, Michigan Association of Realtors and the Michigan Foreclosure Task Force.
Michigan had the highest unemployment rate in the nation in February at 14.1%. The state has had a 35% decrease in average home sale prices since 2005 and it ranks fourth for underwater mortgages with 38% of properties with mortgage balances higher than the market value.
The Michigan program has three components:
* Unemployment Mortgage Subsidy Grant: A one-time fund to assist the borrower in retaining homeownership by subsidizing mortgage payments during their time of unemployment, not to exceed a total of 12 consecutive months.
* Principal Curtailment Grant: One time matching funds for homeowners with severe negative equity greater than or equal to 115% combined loan to value ratio. Fund amount may include a principal curtailment of up to $10,000. Lender/servicer must match with a minimum dollar for dollar curtailment; re-amortizing the lower outstanding loan balance.
* Loan Rescue Grant: One-time assistance to borrower and lender/servicer to reach an amicable loan rescue plan which may include, but not require, a loan modification agreement.
