President Obama announced a plan to give TARP funded assistance to homeowners in some of the states hardest hit by the housing crisis. Included would be second lien mortgage borrowers, including those who have a Home Equity Line of Credit, or HELOC loan.
Aid to the Hardest Hit Communities
The assistance program, which will consist of up to $1.5 billion in funds appropriated from repaid bailout funds, will go to help local housing finance agencies in places like Nevada, Florida and California that have experienced an average price decline of 20% over the past year.
“This program will allow housing finance agencies in the places hardest-hit by the housing crisis find innovative ways to help homeowners stay afloat, and empower local agencies that know these communities best,” President Obama said.
Allocation of Funds
The way in which the program funds are distributed will be determined by the size of the home price declines, as well as the extent of unemployment in the state. High unemployment levels in these areas can increase the impact of housing price increases, especially for working and middle-class Americans.
The funds will also be directed towards those homeowners who have negative equity, meaning that they owe more on their home than it is currently worth, and to people who are struggling with a second lien mortgage. Second lien mortgages and HELOC loans can often be difficult to modify, as it requires negotiations between the first and second lenders. The assistance program can help provide incentives to the second mortgage lenders, helping borrowers get through the modification and stay in their homes.