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$1.5b housing fund to aid five states

By Bloomberg News
June 24, 2010

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WASHINGTON — The Treasury Department awarded $1.5 billion to aid homeowners in California, Florida, and three other states with high foreclosure rates.

Under a program known as the Hardest-Hit Fund, Arizona, Michigan, and Nevada also will receive money, which will be distributed to state housing finance agencies, the Treasury said yesterday in a statement.

“These states have identified a number of innovative programs that will make a real difference in the lives of many homeowners facing foreclosure,’’ Herbert M. Allison Jr., the Treasury’s assistant secretary, said in the statement.

The program is estimated to help 90,000 people having difficulty paying their mortgages or living in homes that are worth less than the loans they secure.

Seventy-five percent of such homes are in the five states awarded aid, said Phyllis Caldwell, chief of the Treasury’s Homeownership Preservation Office. Half are in California, and Florida, Caldwell told reporters.

The hardest-hit fund is part of a mosaic of programs from the Obama administration to stop the spread of foreclosures, which are expected to climb to 4.5 million this year from 2.8 million in 2009, according to RealtyTrac Inc., an Irvine, Calif.,-based research firm.

The effort, which is funded from the $700 billion Troubled Asset Relief Program, aims to curb foreclosures and stabilize housing prices in communities with high concentrations of delinquent borrowers and states where much of the population lives in regions with 12 percent or higher unemployment.

States were required to develop programs to aid homeowners and apply for aid. Their plans include using the money to reduce the principal owed on mortgages, help unemployed and underemployed borrowers make their payments, and pay off second mortgages.