[Federal Register Volume 76, Number 43 (Friday, March 4, 2011)]
[Notices]
[Pages 12127-12129]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-4817]
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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
[Docket No. FR-5470-N-02]
Emergency Homeowners' Loan Program: Announcement of Activation of
Program and Availability of Emergency Assistance
AGENCY: Office of the Assistant Secretary for Housing--Federal Housing
Commissioner, HUD.
ACTION: Notice.
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SUMMARY: This notice announces the reactivation of the Emergency
Homeowners' Loan Program, originally established by statute in 1975,
and reauthorized, with certain modifications, by the Dodd-Frank Wall
Street Reform and Consumer Protection Act, which also made $1 billion
in funding available for this program. The Emergency Homeowners' Loan
Program provides emergency mortgage relief to homeowners who are
unemployed or underemployed and at risk of foreclosure and who meet
certain requirements of the program. This notice sets out the
requirements and procedures by which emergency relief will be made
available to eligible homeowners.
DATES: Effective Date: April 4, 2011.
FOR FURTHER INFORMATION CONTACT: Office of Housing Counseling, Office
of Housing, Department of Housing and Urban Development, 451 7th
Street, SW., Washington, DC 20410; telephone number 202-708-0317 (this
is not a toll-free number). Persons with hearing or speech impairments
may access this number through TTY by calling the toll-free Federal
Information Relay Service at 800-877-8339.
SUPPLEMENTARY INFORMATION:
I. Activation of Emergency Homeowners' Loan Program
The Emergency Housing Act of 1975 (12 U.S.C. 2701), signed into law
on July 2, 1975, conferred on HUD, through title I of the statute,
entitled the ``Emergency Homeowners' Relief Act,'' standby authority to
provide emergency assistance, including emergency mortgage relief loans
or advances of credit, and to make emergency mortgage assistance
payments for the benefit of certain eligible homeowners to defray their
mortgage expenses so as to prevent widespread mortgage foreclosures and
distress sales of homes resulting from a homeowner's substantial
reduction in income resulting from temporary involuntary loss of
employment or underemployment due to adverse economic conditions. The
Dodd-Frank Wall Street Reform and Consumer Protection Act (Pub. L. 111-
203, approved July 21, 2010) (Dodd-Frank Act) revised and reauthorized
this 1975 statute, and makes available $1 billion to HUD to implement
the Emergency Homeowners' Loan program during Fiscal Year (FY) 2011.
HUD is reinstating the 1975 program, with such modifications as
necessary to mirror the statutory changes made by the Dodd-Frank Act,
that provide the regulatory framework by which emergency assistance may
be provided to eligible homeowners. This notice announces the
activation of the Emergency Homeowners' Loan Program (EHLP), and the
availability of emergency mortgage relief payments for eligible
homeowners.
II. Emergency Homeowners' Loan Program Funding for FY 2011
For FY 2011, HUD will administer funding under EHLP, as follows:
A. Counseling for Homeowners
HUD, through a network of HUD-approved housing counselors, and
other such organizations, will provide homeowners with services that
include but are not limited to:
Developing and disseminating program marketing materials;
Providing an overview of the program and eligibility
requirements;
Conducting initial eligibility screening (including
verifying income);
Counseling homeowners, including providing information
concerning available employment and training resources;
Collecting and assembling homeowner documentation; and
Providing transition counseling by exploring with the
homeowner other loss mitigation options, including loan modification,
short sale, deed-in-lieu of foreclosure, or traditional sale of home.
B. Intermediary to Perform Funds Control and Mortgage Servicing
Functions
Pursuant to statutory authority to make such delegations, HUD may
contract with a fiscal agent to provide general accounting and fiscal
control services, including collecting payments from homeowners,
distributing emergency mortgage relief payments to servicers on a
monthly basis, performing
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accounting, managing loan balances, and providing payoff information.
C. States With Substantially Similar Programs
One of the changes enacted by the Dodd-Frank Act was to authorize
the Secretary to allow emergency assistance to be administered by
states with existing programs that provide substantially similar
assistance to homeowners. On November 12, 2010, HUD published a notice
in the Federal Register (75 FR 69454) that described key features of
HUD's emergency mortgage relief payment program for homeowners, and
which solicited applications from states that have existing programs
that may be substantially similar to the EHLP (EHLP Substantially
Similar Program). (See http://www.hud.gov/offices/hsg/sfh/hcc/ehlp/ehlphome.cfm.)
D. Emergency Mortgage Relief Payments
To the extent that a state does not submit information about an
existing program that provides substantially similar assistance to
homeowners, or such submission does not meet the requirements outlined
in HUD's November 12, 2010 notice, HUD will administer the EHLP in that
state in accordance with the requirements of Section III of this
notice.
The regulations in 24 CFR part 2700, as applicable to emergency
mortgage relief payments, apply to the emergency mortgage relief
payments made available through this notice, including use of defined
terms, eligibility requirements for the homeowner, and mortgaged
property, unless otherwise superseded by requirements of this notice.
To minimize cross-reference to the regulations, some defined terms and
regulatory requirements are repeated in this notice.
III. HUD's Emergency Mortgage Relief Payments Program for 2011
A. Homeowner Eligibility
To be eligible for emergency assistance under the EHLP in FY 2011,
a homeowner must have experienced a substantial reduction in income due
to involuntary but temporary unemployment or underemployment resulting
from adverse economic conditions or medical conditions (referred to as
the Event) and meet the requirements set forth in section III.A of this
notice. Accordingly the following requirements determine the
eligibility of the homeowner to receive emergency mortgage relief
payments.
1. Income Thresholds. The homeowner, whose income (annual adjusted
gross income as ``income'' is defined in 24 CFR 2700.5) is combined
with the income of all mortgagors and/or co-signers on the delinquent
mortgage and note,\1\ must have a total pre-Event income equal to, or
less than, 120 percent of the area median income (AMI), as determined
by HUD, of the area in which the homeowner's principal residence is
located, and which income includes, but is not limited to, wage,
salary, self-employed earnings, and other adjusted gross income.
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\1\ Mortgagors and co-signers who are covered by this provision
do not have to have signed both documents. If only one document is
signed by an individual, both are covered under this provision.
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2. Substantial Income Reduction. The homeowner, whose income is
combined with the income of all co-makers and/or co-signers on the note
secured by the delinquent mortgage and the other mortgagors on the
delinquent mortgage, must have a current monthly income that is at
least 15 percent lower than the homeowner's pre-Event monthly income,
with such reduction resulting from the homeowner's involuntary but
temporary unemployment or underemployment due to adverse economic
conditions or medical conditions.
3. Employment. With respect to employment, the homeowner may be a
wage and salary worker or may be self-employed.
4. Delinquency and Likelihood of Foreclosure. The homeowner and all
co-makers and/or co-signers on the note secured by the delinquent
mortgage and all other mortgagors on the delinquent mortgage must
certify that circumstances at the time of application for emergency
mortgage relief payments, including the homeowner being at least 3
months delinquent on the delinquent mortgage, make it probable that the
mortgagee will foreclose on the delinquent mortgage.
5. Ability to Resume Repayment. The homeowner must have a
reasonable likelihood of being able to resume repayment of the
delinquent mortgage obligations, and meet other housing expenses and
debt obligations when the homeowner regains full employment, as
determined by:
a. The homeowner's income, combined with all mortgagors and/or co-
signers on the delinquent mortgage and note, must have a back-end ratio
or debt-to-income (DTI) below 55 percent (principal, interest, taxes,
insurance, and revolving and fixed installment debt divided by total
monthly income). For this calculation, homeowner's combined income will
be measured at the pre-Event level.
b. Homeowners with second mortgage debt or an equity line of credit
(ELOC) are not disqualified from receiving emergency mortgage relief
payments. Applicants with second mortgage payments or ELOC payments
whose DTI ratio is within the program's 55 percent limit may still
qualify for emergency mortgage relief payments based on all other
program eligibility criteria.
6. Principal Residence. The homeowner must occupy the mortgaged
property as the homeowner's principal residence. The mortgaged property
must also be a single-family residence (1-to 4-unit structure, or
condominium, cooperative, or manufactured home).
B. Terms and Conditions of Emergency Mortgage Relief Payments
1. Declining Balance Loans. The repayment mechanism for the
emergency mortgage relief payments made on behalf of the homeowner to
the mortgagee shall be a declining balance, deferred payment, non-
recourse, subordinate loan with zero interest. The declining balance
loan will cover emergency mortgage relief payments provided for
arrearages, including delinquent taxes and insurance, in accordance
with section III.B.2., and up to 24 months of monthly payments on the
homeowner's delinquent mortgage to include principal, interest,
insurance, taxes, and hazard insurance, in accordance with section
III.B.3.
2. Use of Funds for Arrearages. Emergency mortgage relief payments
shall be used to pay 100 percent of the eligible homeowner's delinquent
mortgage arrearages (such as mortgage insurance, principal, interest,
insurance, taxes, hazard insurance, and ground rent, homeowners'
assessment fees, late fees, condominium fees, and certain foreclosure-
related legal fees and late payments, if any) on the homeowner's
delinquent mortgage.
3. Homeowner Contribution Payments. The homeowner contribution to
the delinquent mortgage monthly mortgage payment shall be set at 31
percent of the sum of the eligible homeowner's monthly income at the
time of EHLP application and the monthly income of all other mortgagors
and co-signers (if applicable) of the delinquent mortgage and note at
the time of EHLP application, but in no instance will the homeowner
contribution to the monthly mortgage payment be less than $25 per
month.
4. Use of Funds for Continuing Mortgage Assistance. Monthly
emergency mortgage relief payments on the delinquent mortgage shall be
made to the mortgagee or servicing institution
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in combination with the homeowner contribution payments.
5. Duration of Emergency Mortgage Relief Payments. If at any time
the homeowner's monthly income, including all other co-makers and co-
signers of the note secured by the delinquent mortgage and other
mortgagors on the delinquent mortgage, increases to greater than 85
percent or more of its pre-Event income level, emergency mortgage
relief payments will be phased out over a 2-month period. In any event,
the aggregate amount of emergency mortgage relief payments provided to
any homeowner shall not exceed the earlier in occurrence of: (i) The
receipt of $50,000, or (ii) 23 months beyond the date of the first
payment (this period includes the first emergency mortgage relief
payment, which is inclusive of the first monthly emergency mortgage
relief payment, and the payment of arrearages).
C. Repayment Terms
1. Transition Counseling. A housing counseling affiliate shall
contact each homeowner who is approaching the last months of EHLP
participation and who remains unemployed or underemployed
(approximately 3 to 5 months before the emergency mortgage relief
payments end) and require the homeowner to meet with a HUD-approved
counseling agent to explore alternative available options, such as loss
mitigation, loan modification, short sale, deed-in-lieu of foreclosure,
or traditional sale of home.
2. Repayment of Emergency Mortgage Assistance Payment. As a
condition of the homeowner's approval for participation in the EHLP,
the homeowner shall execute an EHLP Note and EHLP Mortgage in the
amount of EHLP funds, which may not exceed $50,000. The EHLP Mortgage
shall be secured by the mortgaged property in either second- or third-
lien position (as applicable depending on the existence of a second-
lien mortgage). The EHLP Note shall be in the form of a 5-year deferred
declining balance, zero interest, nonrecourse note with a term of up to
7 years.
3. Terms for Declining Balance Feature. No payment is due on the
EHLP Note during the term of the EHLP Note, so long as the homeowner
remains current on the homeowner contribution payment while receiving
emergency mortgage relief payments and on the homeowner's full monthly
payments on the delinquent mortgage once the homeowner is no longer
receiving emergency mortgage relief payments. If the homeowner meets
this requirement, the balance due on the principal balance of the EHLP
Note shall decline by 20 percent of the original principal amount,
annually, until the balance owed on the EHLP Note is extinguished.
4. Ongoing Qualification of Homeowner. After initial income
verification at intake, the homeowner shall be required to notify the
housing counseling agency of any changes in the homeowner's income and/
or employment status during the entire period in which emergency
mortgage relief payments are provided.
5. Termination of Emergency Mortgage Relief Payments. Emergency
mortgage relief payments will terminate and the homeowner will resume
full responsibility for meeting the monthly payments on the delinquent
mortgage in the event of the occurrence of one or more of the following
circumstances:
a. The homeowner has received 24 months of emergency mortgage
relief payments or assistance in the amount of $50,000, whichever
occurs first;
b. The homeowner fails to report changes in employment status or
income within 15 days of the change;
c. The homeowner's monthly income, combined with that of all
mortgagors and/or co-signers on the delinquent mortgage and note,
increases to greater than 85 percent or more of its pre-Event income
level;
d. The homeowner sells the mortgaged property or refinances the
mortgaged property for cash-out;
e. The homeowner defaults on the homeowner contribution payments;
or
f. The homeowner defaults on the delinquent mortgage.
6. Events Triggering EHLP Note Repayment. The homeowner will be
responsible for repayment of the outstanding balance of the EHLP Note,
if, at any time during the term of the EHLP Note, one or more of the
following events occur:
a. The homeowner defaults on the homeowner contribution payments
while receiving emergency mortgage relief payments or on the full
monthly payment owed on the delinquent mortgage once the homeowner is
no longer receiving emergency mortgage relief payments; or
b. The homeowner sells the mortgaged property, resulting in net
proceeds to the homeowner, and satisfies the outstanding balance on the
EHLP Note or the homeowner refinances the mortgaged property and
satisfies the outstanding balance on the EHLP Note. Net proceeds from
sale of the mortgaged property shall be an amount equivalent to the
contract sales price of the mortgaged property less applicable brokers
fees, payoff of first- and (if applicable) second- and third-lien
mortgage balances, and an allowance of $2,000 to the homeowner for
relocation expenses. Net proceeds shall go towards satisfying the EHLP
Note. In the event that net proceeds are not sufficient to satisfy the
outstanding balance of the EHLP Note, any outstanding balance in excess
of net proceeds shall be written off by HUD and net proceeds shall be
sufficient to fully satisfy the EHLP Note and the EHLP Mortgage against
the mortgaged property shall be released.
In the event of a cash-out refinance of the homeowner's delinquent
mortgage (and/or second mortgage, as applicable), the outstanding
balance of the EHLP Note shall be repaid from remaining cash-out
proceeds available after the homeowner's delinquent mortgage (and/or
second mortgage, as applicable) has been paid off, including the
payment of all applicable closing costs, and the EHLP Mortgage against
the property shall be released.
In the event remaining cash-out proceeds from a cash-out mortgage
refinance are not sufficient to satisfy the outstanding balance of the
homeowner's EHLP Note, any outstanding balance in excess of net
proceeds shall be written off by HUD and the remaining cash-out
proceeds shall be sufficient to fully satisfy the EHLP Note and the
EHLP Mortgage against the mortgaged property shall be released.
7. Administration of Emergency Homeowners' Loans. HUD will work
with its fiscal agent in the states that have been allocated funding
for the EHLP, but are not a part of the EHLP Substantially Similar
Program, to make emergency mortgage relief payments to eligible
homeowners under this notice and the regulations in 24 CFR part 2700.
Dated: February 28, 2011.
David H. Stevens,
Assistant Secretary for Housing--Federal Housing Commissioner.
[FR Doc. 2011-4817 Filed 3-3-11; 8:45 am]
BILLING CODE 4210-67-P