Bethann and Steve Harwood of Weaverville talk with Pisgah Legal Services attorney Bill Whalen, who has worked with them on the Hardest Hit Fund program. The foreclosure prevention program is due to expire at the end of July. Colby Rabon / Carolina Public Press

The N.C. Foreclosure Prevention Fund will no longer accept applications for assistance after July 31 due to limited funds.

Those who have helped families needing assistance through the fund are worried that the loss of the program could be devastating for economically vulnerable people in North Carolina.

The fund was created in 2010 after North Carolina received funding from the U.S. Department of Treasury through the Hardest Hit Fund, which President Barack Obama’s administration created in response to the economic crisis and housing market downturn that began in 2007.

“North Carolina got it because we had such a high unemployment rate in half of our counties,” said Connie Helminger, manager of public relations and marketing for the N.C. Housing Finance Agency. “I believe at that time it was 11 percent.”

A total of $9.6 billion was allocated to 18 states and the District of Columbia. Participants have until 2020 to use their funds, according to the U.S. Treasury Department. Each state’s housing finance agency was allowed to use the funds to address state-specific needs, with North Carolina focused on aiding those who couldn’t afford their mortgage due to job loss, Helmlinger said.

North Carolina initially received $483 million with an additional $224 million added in 2015 when Congress made an appropriation to the program, according to Helmlinger.

However, she does not believe any additional appropriations will be made. As a result, the NCHFA is beginning the process of winding down the Foreclosure Prevention Fund.

Homeowners are still encouraged to apply before the cutoff date, as funds still remain. Anyone who is a recipient of the program will continue to receive the allotted money even after the closing date, according to the NCHFA.

“You don’t have to be behind on your mortgage payments to seek help,” Helmlinger said. “Sometimes people lose their job and think that they will be OK for another month, but they can still come in and apply for the program.”

With program ending, what’s next?

No plans exist to replace the fund with another similar program.

Bill Whalen, a senior staff attorney at Pisgah Legal Services in Asheville, who provides legal and housing counseling, said there is no other program like it and the state is losing an important resource.

“The Hardest Hit program is like an oasis of hope for many people who have no other way of saving their home due to a hardship they’ve been through in life that’s got them behind the eight-ball,” Whalen said.

“They need the bridge, the bridge of financial help whether it’s to catch them up or do a paydown.”

The Foreclosure Prevention Fund has already assisted over 28,000 homeowners through either mortgage payment, receiving up to $36,000 over an 18- t0 36-month period or reduction recast, using a loan to pay a portion and then recasting a mortgage with smaller, more affordable payments, Helminger said.

“Without this option, there may be some people who are unable to hold onto their homes and wind up going into foreclosure,” she said.

“I’m hopeful that with the unemployment rates lower and the foreclosure filings lower … counselors will be able to work with the people who still need assistance and work with the servicers and find some solutions for them.”

Foreclosure filings in North Carolina have decreased from 30,000 in 2012 to 14,400 in 2018.

“We were doing 500 loans a month when we first started the program and now we’re doing between 100 and 200. It’s dropped significantly,” Helminger said.

Without the fund, Mary Holder, manager of the state’s foreclosure prevention programs, said she anticipates seeing more difficult cases without a resolution.

“What’s going to happen is we are going to shift back to the type of foreclosure prevention options that we used before the fund became available, the options a servicer offers like loan modifications and repayment plans,” Holder said. “

Yes, we will have one less option, but the servicers options are still out there so the homeowners will still have a remedy when they can qualify for one of those.”

After the fund is no longer available, those in need will be directed to the State Home Foreclosure Prevention Project.

Although it does not help pay mortgages, it provides free counseling through housing counseling partners to aid in the process of renegotiating a mortgage or referrals to legal aid if needed, Holder said.

“It requires the loan servicer to submit notice to the state 45 days prior to starting a foreclosure so that we can reach out to the homeowners to let them know the availability of housing counseling.” Holder said.

Vulnerable populations

The people most affected by the loss of the Foreclosure Prevention Fund will be those with low or no income, the underemployed or unemployed.

“We will have, of course, some impact on the number of people that are assisted mainly because the servicers will not be able to modify a loan unless the homeowner has income,” Holder said. “That is where a homeowner can be backed up to a wall with options because a servicer won’t have an income to modify the loan or offer a repayment plan.”

This includes those who have lost their jobs, anyone who has lost the sole provider in a household due to death or divorce, and those who are on a fixed income, such as Social Security, that is less than what they made before, Holder said.

“It doesn’t take much to destroy a family budget,” Whalen said. “Everything is more expensive, and the income is not going up. People are more and more caught in that pinch, and then when there is a medical problem or the car breaks down, that can be a trigger.”

Ramifications of the fund closure could include added pressure on assisted housing as more people have to relocate to affordable housing after foreclosure since finding a place to rent while dealing with debt and suffering a blow to your credit report is difficult, Whalen said. The record of a foreclosure can remain on a credit report for at least seven years, Holder said.

Additionally, housing counseling programs may see a rise in the number of cases, without the fund program to help.

Whalen said one of the most burdensome aspects of dealing with foreclosure is the emotional and mental turmoil.

“People are scared to death going through it because they don’t know what they’re involved in; it’s full of legalese and legal processes and threatening letters. Stuff that is overwhelming for most people to have to deal with, it’s hard enough living, going to work and paying the bills,” Whalen said. “When you get into default, it has a tremendous psychological effect, it really weighs them down emotionally and mentally and in their sense of self-esteem.”

Many people Whalen counsels are stuck in a cycle of debt and receive frequent threatening letters and phone calls, he said.

“A lot of homeowners are reluctant to reach out to their servicer because of some experiences they’ve had with the collections department,” Holder said. “By the time they reach foreclosure, they need someone to be that coach for them and to help them understand the language of the servicer and what all they need as far as paperwork.”

The State Home Foreclosure Prevention Project acts as a point of contact between the homeowner and the servicer through the process of renegotiation, for the benefit of both sides.

“If the foreclosure is prevented, the servicer also avoids a loss, equity is preserved, and the homeowner stays in their home,” Holder said.

Whalen said the whole community benefits from homeowners keeping their homes.

“A relatively small amount of money from this program has made the difference between someone staying in their home, keeping their family intact, keeping the neighborhood intact, the property not going into foreclosure, going vacant or being turned into rental,” Whalen said.

“We as a society greatly benefit if we can keep homeowners in their home in an affordable way.”

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