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Foreclosure Funds Slow to Get to Homeowners

USA Today

A $7.6 billion federal program to help prevent foreclosures is still struggling to get money out to homeowners more than two years after the money went to states.

Through November, $900 million had gone to homeowners, and another $620 million had been committed to them in the 18 states and Washington, D.C., involved in the Hardest Hit program, the Treasury Department says.

The program, one of several Obama administration efforts to combat foreclosures, awarded funds to states most affected by unemployment and fallen home prices. The states have until 2017 to spend the money.

The states, which got different amounts of money, developed their own programs largely targeting lower income jobless and underemployed homeowners.

Start-up processes were slow, given that programs had to be started, in some cases, from scratch, state officials say.

Through September, states had helped more than 77,000 homeowners with Hardest Hit funds, a December Treasury Department report says.

In July, a Government Accountability Office report noted the program's "slow start" but said things were improving. Many states have changed their programs to enable quicker, bigger and more long-lasting payments, state officials say.

California, Nevada and Arizona, for instance, changed their programs this year to make it easier for homeowners to get money to reduce what they owe on home loans.

California got $2 billion in funding, the most of any state. It had initially required servicers -- who manage loans for themselves or investors -- to match principal reductions made with Hardest Hit funds.

Few servicers took part, and neither did mortgage giants Freddie Mac and Fannie Mae, says Di Richardson, head of the California program. California now provides up to $100,000 for principal reduction for eligible applicants, up from $50,000, with no required match.

"Things are really picking up," Richardson says.

So far, California has disbursed more than $200 million to 20,000 homeowners, Richardson says.

Ohio, which got $570 million, raised its maximum from $15,000 to $25,000. Florida, with $1.1 billion, extended benefits from six months to 12 months to the unemployed or underemployed.

Through September, Arizona had spent more on starting and running its program, $5.9 million, than it had disbursed to homeowners, $5.7 million, its report to the Treasury department shows.

Administrative expenses -- which include funds to hire housing counselors to help applicants -- will shrink as a percentage of spending as payouts to homeowners increase, Treasury says.

The department caps what states can spend to administer their programs. Caps range from 7.5% of funds for California to almost 20% for Washington, D.C., which got the least in funding, $21 million.

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