The U.S. Treasury announced Thursday that it has approved $1.5 billion in Hardest Hit Fund grants for Arizona, California, Florida, Michigan and Nevada. To be eligible for the programs, states must have experienced a 20% or greater decline in average housing prices.
“During these difficult economic times, we will work to help responsible homeowners stay in their homes and stabilize the housing market so home values can rise,” said President Barack Obama. “This program will allow housing finance agencies in the places hardest-hit by the housing crisis find innovative ways to help homeowners stay afloat, and empower local agencies that know these communities best.”
Throughout the housing crisis, minority homeowners have epitomized the meaning of “hardest hit.” According to a recent report by the Center for Responsible Lending, 8% of recent African American and Latino borrowers have lost their homes to foreclosure versus 4.5% of white borrowers and African American (21.6%) and Latino (21.4%) borrowers are more likely to be at imminent risk of foreclosure than non-Hispanic white borrowers (14.8%). In addition, the center estimates that between 2009 and 2012, black communities will have lost $193 billion in wealth as a result of foreclosures and the depreciation of nearby properties.
“Minority homeowners have been disparately impacted by the foreclosure crisis and we’re encouraged that Treasury has provided states with the funds necessary to innovate around foreclosure prevention,” said Sara Weed, the CRL’s policy counsel. “Given the states identified by the program, we believe there are definitely significant implications for both minorities that are at imminent risk as well as those who are members of communities that have been hardest hit by the foreclosure crisis.”
Weed also believes that there’s an opportunity for synergy between state initiatives and existing programs such as the Home Affordable Modification Program and that states should leverage the resources provided by the Hardest Hit Fund to bolster such efforts.
Assistant Secretary for Financial Stability Herbert Allison said that Treasury has developed a procedure to track the fund’s impact on different racial, gender and ethnic groups around the country, which eventually will be reported on the agency’s Website.
The funds, which will be administered by each state’s Housing Financial Agency, will target lower income areas that have experienced the highest rates of unemployment. The proposals approved include programs to help homeowners with negative equity through principal reduction; assistance for the unemployed or underemployed to make their mortgage programs; facilitating the settlement of second liens and short sales; and helping borrowers with arrearages. Treasury is currently reviewing proposals for a second round of Hardest Hit funding submitted by North Carolina, Ohio, Oregon., Rhode Island, and South Carolina.
Like Weed, John Taylor, who heads the National Community Reinvestment Coalition, also is encouraged that the program will be very helpful to minority homeowners.
“What’s really needed is not just the reworking of the mortgage for a lot of people, but an actual reduction in their principal and interest with something subsidizing that occurrence,” Taylor said. “And that’s what this Hardest Hit Fund is about. In the same way they moved to help the banks they’re now moving to help ho in a way that I think will be very effective.”