Florida's billion-dollar program helping the hardest hit homeowners with mortgage payments is poised to launch a $50 million pilot to aid "underwater" borrowers -- a large, at-risk group whose plight threatens the fragile housing recovery.
The Florida Housing Finance Corp., which oversees the state's Hardest Hit Fund, expects to announce an initiative early next year to pool federal and nonprofit dollars to reduce 2,000 mortgages owed on homes that are worth less than the remaining balance on the loans.
More details, including specific eligibility criteria, have not been determined, but it will be designed for homeowners who are severely delinquent on their Federal Housing Administration-insured mortgages, said Cecka Green, spokeswoman for Florida Housing.
If the pilot is successful, the program could launch statewide, Green said.
But even as Florida Housing focuses on developing the new program, the Hardest Hit Fund is still processing 11,000 applications to cover mortgage payments for homeowners who are unemployed or aren't earning enough to meet basic living expenses.
Created nearly two years ago to help roughly 40,000 unemployed or underemployed homeowners, the agency has approved funding for fewer than 8,100 applications as of Dec. 1, records show.
Some critics say eligibility requirements for the Hardest Hit Fund are too restrictive, while others accuse Florida housing officials of not working fast enough.
"Sure looks like the state is still dragging its feet," U.S. Sen. Bill Nelson, D-Fla, said in an emailed statement Thursday.
The Florida Housing Finance Corp. defended its handling of the Hardest Hit program, saying it loosened the eligibility standards earlier this year to reach more homeowners, including those who previously didn't qualify because they were 180 or more days delinquent.
Florida Housing and other groups have been criticized for not trying to help underwater borrowers sooner, considering the scope of the problem.
Roughly 1.3 million Florida homes, including more than 235,000 in Palm Beach and Broward counties, are worth less than their mortgages, according to Seattle-based real estate website Zillow.com. Estimates by RealtyTrac Inc. of Irvine, Calif., put the numbers even higher.
The federal government has given $7.6 billion to 18 states and the District of Columbia -- areas hit hardest by the housing downturn.
Green said there is no specific timetable for Florida's pilot program to help underwater homeowners but they hope to launch in the first quarter.
The plan may help people like Shannon Havasi and her husband, Ryan, who bought their home in suburban Delray Beach for $365,500 in June 2005, near the peak of the housing boom. Palm Beach County appraised the property this year for $131,304.
The couple say a principal reduction orchestrated by the state may be their best chance to stay in the home long term.
"My husband gets so upset," said Shannon Havasi, 35, an elementary schoolteacher in Boynton Beach. "When he talks to the bank, he starts freaking out. He wants to work with them, but they don't work with you."
Despite rising prices in recent months, it may be years before people who owe more than their homes are worth can break even in a sale. They are in danger of letting the homes fall into foreclosure, analysts say.
While no individual plan can fix the housing crisis, "anything that gets at the heart of the equity issue will be more successful than other programs," said Mike Larson, an analyst for Weiss Research in Jupiter. "Once you push the reset button on the mortgage, you give people the incentive to stick around in their homes."
Broward County resident Barbara Mullenix applied for the first program offered by Florida Housing, but she said she was turned down. She eventually completed a short sale of her Sunrise home and rented an apartment in Plantation.
Mullenix said the program being created for underwater borrowers has promise. "It's another shot, but a lot of people have lost heart," she said.
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