The economic downturn, which started last 2007, created a huge impact on the financial stability of many American citizens. Debt management issues were piling up and the inability to pay monthly obligations is becoming an increasing problem. This troubling financial situation has left many homeowners under a terrible financial difficulty with their mortgage payments. Many of them have become delinquent payers and whose homes are now threatening to be foreclosed.
The U.S. government has taken action on the issue of increasing mortgage rates and other problems in the mortgage market. The Obama administration has already launched plans and programs to provide assistance to many struggling homeowners, offering really low mortgage rates. Last February of this year, the president presented a plan of providing housing assistance geared towards five states, which are the most affected places by the housing bust. The proposition utilized $1.5 billion in the federal funds, with the borrowers and homeowners in each state granted low mortgage rates of less than 5 percent. The five states – California, Florida, Michigan, Arizona and Nevada – have now submitted their proposals to the government Treasury on how the money will be used.
Florida got $418 million and a huge percentage of this money was given as financial assistance to the unemployed individuals who were delinquent in their monthly mortgage due to loss of jobs. A document of financial hardship is a major requirement for the borrower to become eligible for an interest-free loan with a condition that the homeowner is up-to-date with the monthly payments for six years.
The state of Arizona was allocated $125.1 million and used $90 million for loan balances reduction particularly to underwater homeowners. About $7.5 million was used to help some borrowers get rid of second-lien loans. For the unemployed borrowers, a $12 million share was set aside for them. The housing counselors get an assistance of $10 million from the given amount.
Michigan State received $155 million from the funds, with two-thirds of it sponsored to the mortgage payments of laid-off homeowners for up to 12 months. The $31 million allocation went to banking institutions to settle loan balances for those whose mortgage amounts exceed the home’s market value and will not qualify for either refinancing or loan modification.
Of all the five states, California received the biggest financial assistance of $699.6 million with a similar purpose of distributing financial aid to unemployed borrowers, those with delinquent mortgage payments as well as those with refinancing loan arrangements.
Nevada had a share of $100 million from the funding and this figure was based on the rate of unemployment and the number of foreclosures in the state.
This financial assistance from the government is also set to target a second batch of states with very high unemployment rates last June. The states mentioned were North Carolina, Ohio, Oregon, Rhode Island, and South Carolina.