State program will help some underwater homeowners in Deschutes County

Over the last month or so I’ve helped 12 homeowners apply for and qualify for the Oregon Hardest Hit Funds Program, also known as the Loan Refinance Assistance Pilot Project. Today there was an article in The Bulletin about the program. While the article states that the pilot project could still be several months away from implementation, you can contact me directly to get your application started. 

By Elon Glucklich / The Bulletin   Published: March 15. 2012 4:00AM PST

Deschutes County residents owing more on their homes than those properties are worth could soon find a new customer for their underwater mortgages: the state of Oregon.

State housing officials are getting ready to unveil a new housing assistance program in Deschutes and Jackson counties.

The program, known as the Loan Refinance Assistance Pilot Project, is backed entirely by federal dollars, allocated to the state as part of the federal Hardest Hit program aiding states disproportionately impacted by rising unemployment and foreclosures during the Great Recession.

The program essentially encourages underwater homeowners to move forward with a short sale, said Ben Pray, spokesman for the Oregon Homeownership Stabilization Initiative, the state agency authorized to manage Oregon’s $220 million in Hardest Hit funds.

But the homeowner never parts with his or her property. Instead of selling the home outright, the short sale is negotiated with the state’s housing finance agency, Oregon Housing and Community Services.

OHCS takes on the cost of the original loan, then works with the homeowner’s lender to negotiate a new loan with lower payment rates, using the Hardest Hit funds.

OHCS and the agency’s contractor for the pilot project, Portland-based real estate company Further Development LLC, buy the new, more affordable mortgage for the home, based on its current value instead of the higher value at the time the homeowner bought it. The new mortgage is then passed back to the homeowner.

It’s a complex, multi-step process, Pray said. But it could save homeowners hundreds per month on their mortgage payments.

“It’s a brand-new idea,” Pray said of the pilot project. He added that it’s designed so that, after a year or so of lower monthly mortgage payments, homeowners could find themselves in a healthy enough financial situation where they could then refinance their mortgages once again, and the state could recover funds unused by the enrollee for another distressed homeowner.

Distressed regions

Deschutes and Jackson counties were picked as locations for the pilot program because of their high unemployment and foreclosure rates.

Deschutes County’s unemployment rate has held above 10 percent for 40 straight months.

Many county homeowners have seen their property values shrink by as much as 50 percent over the last four years. In 2007, the median value of a home sold in Bend was $345,000, according to Central Oregon Association of Realtors data. In 2011, it was $190,000, a 45 percent loss.

Many of the owners who bought when the market was booming between 2005 and 2007 face monthly mortgage payments they can no longer afford, said Laura Fritz, housing director with the Central Oregon nonprofit NeighborImpact.

In Central Oregon, “the (housing) market has lost so much value in the last four or five years, that at this point there are a lot of households that are in way over their heads,” Fritz said.

The pilot project won’t come close to helping all of the county’s underwater home-owners. But Fritz called it a good start.

“The need (for assistance) is so high these days,” she said.

Helping homeowners

Hardest Hit funds were made available to Oregon and 17 other states, as well as Washington, D.C., starting in 2010, when the federal government allocated $7.6 billion in Troubled Asset Relief Program funds.

With Oregon’s $220 million in funds, housing officials have unveiled several programs to aid distressed homeowners, including a mortgage payment assistance program that has provided $3 million in mortgage payments to 350 Central Oregon homeowners.

This pilot program isn’t for everyone. Eligible enrollees have to have a current level of income high enough to make renegotiated mortgage payments, while showing that they’ve suffered recent financial difficulties, whether through a reduction in work hours, medical expenses or some other form of hardship.

Between Deschutes and Jackson counties, $10 million will be made available, with funds going to an estimated 300 homeowners in the two counties. The pilot project could still be several months away from implementation, Pray said. Over the next several weeks, OHSI will finalize aspects of the program.

Pray said a wider announcement about the program and its eligibility requirements could come in the next few weeks.

The program has been in the works for 18 months, but it requires the state to work with banks to negotiate the new loans. The agency also first launched the mortgage payment assistance program, which provides help statewide.

Pray said the Oregon Homeownership Stabilization Initiative had already secured agreements with several banks to take part in the program, and anticipated closing deals with more banks before it is unveiled.

The program is a perfect fit for the region, said Deschutes County Commissioner Alan Unger, because it addresses one of the highest-priority issues for the county: keeping distressed homeowners in their homes and out of foreclosure.

“I think it’s a great idea,” Unger said. “We have a serious problem here with the high inventory of (foreclosed) housing on the market. This would be a great place to have this kind of pilot project worked through.”

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