Emergency Loans Can Bridge Mortgage Gaps

The new buzz program of the near future may be ‘emergency mortgage assistance,’ or loans from the state government to cover mortgage payments and fees while homeowners are down on their luck. This could be a very useful program for the many struggling borrowers who just a need a little help for a short period of time.

It’s been going on in Pennsylvania since 1983, and now several states are seeking to copy its success. The PA program provides for loans up to $60,000 for a maximum of three years to mortgage borrowers who are unable to make their payments due to job loss or some other legitimate financial hardship.

This program has helped as many as 43,000 homeowners since its beginning, for loans worth a total $450 million. The Pennsylvania Housing Finance Agency has an 80 percent success rate.

If you happen to live in Nevada, California, Florida, Delaware, North Carolina or Massachusetts, a similar program may be available to you soon. In conjunction with the latest Obama administration housing initiative of $1.5 billion for the states hit hardest by foreclosures, several states have been talking with the Pennsylvania Agency to learn how to set up their own emergency mortgage assistance programs.

If the other states stick closely to the PA model, only borrowers who have a reasonable chance of resuming their payments within 3-6 years will be selected, meaning those who should be able to find a new job, recover from a disability-causing injury, etc. And the requirements are also very strict in terms of how the borrowers have managed their resources to that point. Those with a lot of credit card debt are not likely to be considered. The loans are typically repaid at low interest rates over a 10-year period.

While this type of plan will not save the majority of distressed homeowners from foreclosure, it could certainly give a break to the very deserving – those who have worked hard and simply fallen into bad luck or on hard times.

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