HEMAP - Homeowners' Emergency Mortgage Assistance Program

The Obama government is considering helping out-of-work homeowners in their homes until they find another job, according to people familiar with financial rescue programs. The government is planning to spend up to $50 billion towards this program from the$700 billion Troubled Asset Relief Program to help lenders modify mortgages for troubled homeowners.
This proposal is currently being introduced by Elizabeth Warren, chairwoman of the Congressional Oversight Panel, which is a TARP watchdog group, and some groups representing troubled homeowners, are urging the Treasury Department to consider using some of the federal TARP funds from the modification program to help poeple out of jobs by providing them a bridge loan, These loans will not accrue interest until they get back their old income or a stable job.
The panel says in a recent report that the current Treasury mortgage modification program is focussing too much on the early financial crisis issues of unaffordable sub-prime mortgages. Panel member Richard Neiman says that a second wave of foreclosures is going to happen that would be due to loss of income and unemployment, rather than earlier issues.
"The mortgage crisis may have begun with unaffordable sub-prime or exotic loans, but it has expanded to capture an increasing number of homeowners with traditional, prime loans as the recession lingers," said Neiman.
The current rate of Job losses at 9.8% in September is expected to rise in to the double digits and beyond, driving the unemployment rate much over the 26-year high of 9.8%. Since the recession began in December, 2007, we have lost more than 7.2 million jobs and the unemployment rate has doubled. A recent poll of 44 forecasters released by the National Association for Business Economics(NABE) found that unemployment is expected to remain high in to 2010 and possibly 2011.
How it works
The HEMAP program that plans to keep out-of-work homeowners in their homes,that was proposed during an oversight panel field hearing last month would be based on Pennsylvania's Homeowners' Emergency Mortgage Assistance Program.
HEMAP was established in 1984 by Pennsylvania state officials to rovide a two or three-year loan to a homeowner who has lost a job, depending on the person's finances and economic situation. Under this program, homeowners will not be responsible for repaying the majority of the principle or any interest until he or she finds a job.

More specifically, a struggling homeowner in the Pennsylvania program, who has minimal resourcesw will be required to pay atleast a token $25 a month till they get another job and their gross income surpasses 35% of their monthly housing costs, which will include mortgage and utility payments,In cases, when the homeowner has some income, the payments will be made partly by the homeowner and partly by the state.

"What we're recommending to the administration is that they give people this loan until they get back to work," said John Dodds, director of the Philadelphia Unemployment Project. "If you don't deal with the people who lost their jobs, you are missing half of the problem and if these homes go into foreclosure it's bad for the broader economy and bad for neighborhoods, it's hard to recover."
The Obama administrations mortgage modification program people and officials from the Housing and Urban Development agency have had discussions with Pennsylvania officials responsible for the development of the HEMAP program to prospect whether this program can be applied natioanally. The meeting was met with a positive response from the HUD officials, they said. A federal official familiar with the mortgage modification program said the meeting took place and "a range of options are being discussed to expand the mortgage modification program nationally."
Meanwhile, Neiman said he plans to discuss the HEMAP program with key Treasury officials as well as HUD Secretary Shaun Donovan. "I would propose that Treasury consider using TARP funds to fund existing or future state emergency mortgage assistance programs," Neiman said.
Treasury spokeswoman Meg Reilly said the department will continue to study other ways to help unemployed homeowners. She added that the Treasury has taken "unprecedented steps" to help unemployed Americans, including the provision of 79 weeks of unemployment benefits, an additional $25 a week in benefits and a subsidy for COBRA health insurance.
She pointed out that the Treasury's $50 billion modification program, known as the Home Affordable Modification Program, or HAMP, is open to the unemployed
However, Dodds argues that even though the HAMP program is open to the jobless, it is not being used effectively to help the unemployed.
"It's a real chaos with the mortgage companies trying to get HAMP going," Dodds said.
He adds that, unlike the HAMP program, a federal loan approach to the jobless could help a large number of people in a short period of time. It also solves the concerns of mortgage servicers who complain they will be sued by mortgage securities investors who argue that these lenders will file lawsuits against them for modifying mortgage payments, he said.
Irwin Trauss, attorney at the Philadelphia Legal Assistance Center, said the HEMAP program only provides loans to eligible unemployed, such as those who have lost their job through a layoff. He said the loans would be a critical bridge for individuals that lose their jobs and are seeking employment, until they find new jobs.
Trauss said he envisioned that the loan could be completed in conjunction with a HAMP modification or on its own.
Congressional Action
Legislation currently pending in congress could institute the HEMAP program, even if treasury does not go for it. House Finance Committee Chairman Barney Frank, D-Mass., has proposed a plan to use $2 billion of money repaid by TARP bank bailout recipients for funding programs that would give emergency mortgage relief payments for the recently jobless or other struggling homeowners. The money would go into an special Relief Fund," which would be used for that purpose. Read the legislation
On the Senate side, Senate Banking subcommittee on Securities and Investment Chairman Jack Reed, D-R.I., has proposed a similar bill which would give $6.5 billion to states to set up such programs, which would also include delayed interest loans, for troubled homeowners who are unemployed.
However, the hope is that both the Treasury and HUD will independently provide such a program, rather than waiting for congress to pass a bill. "By the time 50 states set up 50 programs, we could be too far along into the wave of foreclosures," Dodds said.