Comment: Homeowner Assistance Fund ends – foreclosure risk not eliminated

The Maryland Homeowner Assistance Fund had been a lifeline for low-income people at risk of losing their homes.The Fund has officially disbursed or appropriated all $185 million provided. By Maryland Department of Housing and Community Development We assist homeowners with home loans, reverse mortgages, homeowners insurance, water bills, property taxes, delinquent homeowners association dues, and more. The depletion of the fund marks the end of one of the most important assistance programs for low-income homeowners in the 21st century, especially Maryland Legal Aid clients.

The Maryland Homeowner Assistance Fund was created in 2021 as an evolution of the American Rescue Plan Act.As part of the relief law, the State of Maryland and the Department of Housing and Community Development Provided funding to assist homeowners adversely affected by the COVID-19 pandemic. As a result, thousands of low-income homeowners in Maryland received assistance with delinquent mortgages, property taxes, homeowners insurance, and homeowners association fees. Thanks to support funds, many foreclosures and tax sales were avoided. Maryland Legal Aid alone has helped more than 100 homeowners. This allowed Maryland Legal Aid clients to maintain home ownership, avoid foreclosure and tax sales, and avoid and exit monthly Chapter 13 payments.

One senior client came to Legal Aid of Maryland just before the foreclosure sale date. At the time, she attempted to file for foreclosure settlement, but her paperwork was not properly completed and the foreclosure sale was proceeding. Maryland Legal Aid was able to obtain an extension on her reverse mortgage, the foreclosure lasted for one year, and she ultimately received homeowner assistance funds in an amount sufficient to cure the reverse mortgage default. Ta. She currently lives in her home and she has already received a property tax deduction for this year and is working with her daughter to purchase homeowners insurance for the property to avoid future problems. I am currently joining.

The problem is that when the fund was created, it was assumed that the economic, social, and medical crisis that caused many homeowners to fall behind on their mortgages, property taxes, and water bills would end after the distribution. is. That led to the end of the Homeowner Assistance Fund in September, when the media and many in Maryland were focused on Washington, D.C.’s impending government shutdown.

But many of the conditions that put Maryland’s low-income homeowners at risk remain. Beyond the employment situation, Maryland’s economic climate remains tougher than ever for low-income homeowners.

Other options to prevent foreclosure if homeowners default on their mortgage or other payments are not as attractive as they were in pre-pandemic 2019. Home values ​​have risen sharply since the pandemic began, and Chapter 13 bankruptcy, once a last resort for defaulting homeowners, has become increasingly difficult for low-income homeowners. It’s getting difficult. Maryland’s limited homeowner deductions make Chapter 13 very expensive for homeowners with large amounts of equity.

Additionally, it is becoming increasingly difficult to obtain loan modifications from homeowners’ banks and mortgage servicers. This is because interest rates have risen sharply over the past few years due to inflation. This means that most loan modifications come with higher interest rates and higher payments than your original loan. Similarly, lenders are not obligated under federal regulations to offer loan modifications, regardless of changes in the homeowner’s circumstances, because the homeowner is already behind on low mortgage payments. Many lenders are reluctant to offer loan modifications that result in increased payments, regardless of changes in the homeowner’s circumstances.

It would be great if the Maryland Homeowner Assistance Fund remained in place forever, but it is understood that this fund was intended to be a one-time fund, perhaps due to COVID-19. Masu. But neither the state nor the federal government needs to allocate $148 million to solve Maryland’s continuing foreclosure problem. Governments at all levels could take steps to make loan modifications more readily available or to create requirements for servicers to offer modifications.

States could expand the exemptions allowed for homeownership, which would make it easier to file for Chapter 13 bankruptcy for homeownership purposes. States also could strengthen foreclosure settlement procedures to require banks and mortgage servicers to offer solutions that allow homeowners to retain ownership of their properties. Some steps have already been taken, such as creating a homeowner protection program that allows for property tax payment plans. But governments can do more than that.

William Steinwedel serves as the supervising attorney for Maryland Legal Aid’s Foreclosure Legal Assistance Project.

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