27 June 2010

Michigan gets $155M to Target Foreclosures

The Detroit News

Michigan is ready to distribute nearly $155 million to fund foreclosure prevention programs, money the White House hopes will curb the state's flood of foreclosures.

Dubbed the "Hardest Hit Fund," $1.5 billion has been earmarked for five states -- Michigan, Arizona, California, Nevada and Florida -- where home values have decreased, on average, 20 percent or more. This first round of funding will be followed by a second that will give $600 million to five states with areas of high unemployment, including Ohio.

The money comes as the Commerce Department on Wednesday reported a bleak 33 percent fall in new home sales during the month of May, the result, experts said, of a phase-out of the popular first-time homebuyers tax credit that gave up to $8,000 for qualified buyers.

Robert Rahal, president of Birmingham-based Shore Mortgage, said the tax credit helped give the market a boost. While the new round of funding from the feds won't directly spur sales, Rahal said, it could help keep the market from tanking further.

"The fewer houses we have in foreclosure the better," he said. "Anything that can help stabilize that and get the appreciation process going is very welcome."

The states in the first round have consistently topped lists tracking housing value declines and foreclosures. Metro Detroit has been one of the hardest hit, with home values plummeting as workers have fled the state seeking opportunities elsewhere, leaving behind a market with a glut of cheap real estate.

The Michigan State Housing Development Authority will administer three programs with the federal money. It submitted plans for the programs in April for approval by Treasury Department officials.

To qualify for all of the programs, the homeowner has to remain living in the house and paying the mortgage for five years after receiving money; otherwise the money would have to be paid back.

MSHDA's three programs:

• $99.8 million will go to the Unemployment Mortgage Subsidy, which will pay for up to half of the monthly mortgage for unemployed workers while they're looking for a new job, up to a maximum of $750 monthly.

• $15.5 million will go to the Loan Rescue Program, which offers grants of $5,000 to homeowners needing help to catch up on their mortgages.

• $30.4 million goes to the Principle Curtailment Program, which puts up $10,000 in matching funds for homeowners who need to refinance mortgages in which they owe more than their homes are worth.

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