The president announced a plan to funnel $1.5 B to housing agencies in Arizona, California, Florida, Michigan and Nevada. The plan is designed to help the states that have been impacted the most over the downturn in the real estate market and rising unemployment rates.
Florida currently tops the nation in loan defaults with more than 20% of all mortgages that are seriously delinquent or in foreclosure. The idea is that although this amount is a drop in the bucket, that it will encourage states to think creatively and find solutions to the struggles in the housing market.
The Making Home Affordable Program has struggled to help unemployed homeowners who can not qualify for modifications based on their income. It is also an attempt to tackle the thorniest issue to come from the mortgage meltdown – how to cope with homeowners in upside-down loans.
The $1.5 B is coming from the Troubled Asset Relief Program (TARP) and can be used to help negotiate with lenders to write down mortgages on underwater loans. The money will be distributed to states based on a formula that considers home price declines and unemployment.
The hopes are this new program can help the states that are in the most trouble based on local conditions.