The Center for Responsible Lending commends the U.S. Treasury Department for making "Hardest Hit Funds" available to housing finance agencies in five additional states: Ohio, North Carolina, South Carolina, Oregon, and Rhode Island. This follows a similar action in February to provide funding to California, Florida, Arizona, Michigan, and Nevada.
This second round of state funding comes on the heels of the Administration's release of new tools to encourage more effective foreclosure prevention and unemployment assistance through the federal Home Affordable Modification Program (HAMP). While the new enhancements are positive, we are concerned that the program as a whole remains voluntary.
"The Hardest Hit funding represents a significant opportunity for states that urgently need to accelerate economic recovery," said Uriah King, CRL's Vice President of State Policy. "These states can leverage their existing resources and explore other best practices to take a giant leap forward in stabilizing local communities."
States remain on the front lines of the foreclosure crisis. With millions of families throughout the country facing foreclosure, the innovations from these 10 states will ultimately benefit all Americans. Since 2007, 6.6 million foreclosures have been filed across the nation; by 2012 that number may climb as high as 13 million.
Beyond HAMP, states have other effective options for encouraging sustainable loan modifications. For example, several states are pursuing servicing reforms, implementing mediation programs, or exploring ways to require loan servicers to consider a loan modification before pursuing foreclosures. States have also taken the lead in the fight against predatory lending abuses through enforcement. For example, just last week, Attorney General Coakley in Massachusetts settled an investigation of Countrywide's abusive mortgage lending practices, reaching an agreement with Bank of America to reduce loan balances for a group of distressed homeowners.
Each state can take a meaningful step forward in preventing unnecessary foreclosures and stabilizing communities by developing programs that respond to the needs of their communities in several ways:
- Do more to push servicers to reduce loan balances on homes worth less than the mortgage;
- Help homeowners who have lost their jobs due to the recession caused by the collapse of the housing market; and
- Eliminate roadblocks posed by second mortgages, which to date have been a huge obstacle in preventing foreclosures that could be avoided.