Arizona's jobless able to keep homes with help of federal funds

Even as unemployment aid in Arizona dwindles, a federally funded program is quietly helping more people in the state afford their mortgages after they lose a job.

An Arizona Housing Department program called Save Our Home AZ gives qualified homeowners cash assistance to make their mortgage payments if they are unemployed or underemployed.

The program uses $36 million of a Treasury Department allocation given to states suffering the most from the real-estate crash.

When the aid program launched last year, the cash-assistance plan was largely overshadowed by another portion of the plan that aimed to help homeowners by modifying their mortgages to reduce their payments. The money paid for paperwork assistance and gave lenders incentives to modify loans.

But the loan-modification plan has foundered, partly because it requires that banks forgive a portion of the amount borrowers owe, something lenders are reluctant to do.

As Housing Department officials found themselves unable to use the money for loan modifications, they ramped up the mortgage-aid aspect of the program.

The department can offer qualified homeowners up to $2,000 a month to pay their mortgages for as long as 24 months.

Housing advocates applaud the program and say not enough homeowners know about it. So far, 67 Arizona homeowners have received aid, and the agency expects hundreds more will follow this year. The program has until 2017 to spend the money, and almost 900 applications are pending.

Help under way

Heather Owens applied for mortgage help from the Housing Department four weeks ago and has been approved and has made her first partial payment. The Housing Department is helping her, with $287 a month, make the payment on the Tempe home she and her husband, Daniel Owens, have owned for 17 years. Their two children, who go to Scottsdale Community College, live in the guesthouse in the back and pay the couple rent.

"I was working in the offices of an air-conditioning firm when my mother got ill," Heather said. "I took temporary leave to take care of her, but when I went to get my old job back, it was gone."

Daniel works full time as an AC repairman, but his hours go down in the winter and spring.

Heather said the couple used savings to make their mortgage payments for more than a year while she looked for another job. Then, she was contacted by her lender about obtaining a loan modification with a lower monthly payment. She thought the offer came at a perfect time.

She filled out the paperwork and was told she qualified and to stop making her payments until her loan was modified. She said she kept calling and never heard back, until the lender told her it had started foreclosure proceedings against her in March.

The Owens' story has become common. Lenders initially approved borrowers for loan modifications and later started foreclosure proceedings.

Heather heard about the Housing Department's program and found its website.

"It was so easy to apply, and the housing counselors are so nice," she said. "I was so depressed before. I would have sold everything to save our house."

Who qualifies

Not all unemployed homeowners qualify for the Housing Department aid.

The applicant must live in the home. Applicants must show they are unemployed or have reduced income and can no longer afford their mortgages.

A homeowner can't owe more than 120 percent of what the house is worth now. So, many homeowners won't qualify because home values have dropped 55 percent since the boom.

A borrower can't have cashed out any equity through a refinancing or second mortgage. Many metro Phoenix homeowners tapped their equity during the first half of the past decade as home values soared. Finally, the borrower must be 60 days behind on his or her mortgage payment.

The requirements may sound tough, but several have been recently changed so more people can qualify.

"The program has been updated," said Patricia Garcia Duarte, chief executive of the non-profit Neighborhood Housing Services of Phoenix Inc. "I believe many people don't know about the program. More people should now be able to qualify."

Loan modifications

The Treasury Department's so-called Hardest Hit Housing program focused mostly on loan modifications, setting aside far more money for those plans - more than $230 million in Arizona. But that segment has been a disappointment to borrowers, the federal government and the Housing Department.

The plan requires lenders to write down as much as $50,000 of a borrower's principal, which the Housing Department will match. The idea is to reduce the loan amount and monthly payments enough so homeowners can avoid foreclosure and aren't tempted to walk away from their homes.

The Housing Department has been able to complete only four loan modifications in Arizona. Early this year, Bank of America agreed to work more diligently with the state on the program. Housing Department Director Michael Trailor believes the first BofA loan modification under the program will be finalized in the next week.

For now, the payment-assistance program is mostly helping homeowners who are waiting for a new job rather than a loan modification.

Heather Owens is going to night school to become a chemical-dependence counselor.

She said her lender wouldn't even help her try to find Arizona's payment-aid program.

Trailor and housing counselors hear similar stories all the time. He is glad Owens didn't give up.

"We want to get the word out to people unemployed and underemployed," Trailor said.

by Catherine Reagor The Arizona Republic Jun. 28, 2011 12:00 AM




Arizona's jobless able to keep homes with help of federal funds