President Obama announced a program Friday to funnel $1.5 billion to states to assist unemployed, underwater and second-lien borrowers.

Under the program, the administration will direct $1.5 billion from the Troubled Asset Relief Program to housing finance agencies in five states that have suffered a 20% drop in average home prices. The states receiving the grants — California, Nevada, Florida, Arizona and Michigan — must develop programs for unemployed homeowners, underwater borrowers and second-lien mortgages. Obama announced the program at an event in Nevada.

The Treasury will have to approve the HFA programs, but the HFAs will then determine the priorities of the funds in their local markets.

The administration outlined suggested assistance. For unemployed borrowers, the administration suggested programs to help borrowers until they have a new job. For underwater borrowers, the administration suggested lenders write down the mortgages.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.