End of Mortgage Assistance Could Undermine Economic Recovery

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.

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