Mortgage Bailouts? Govt Prepares to Disburse $2.1B to 'Hardest-Hit' Homeowners
April 28, 2010 — -- "Government handouts." That's what Anna Aquino, 31, a homeowner in Kissimmee, Fla., calls her state's latest plan to help residents pay off their mortgages.
Aquino, whose own home has lost $30,000 in value since she bought it during the boom, says Washington's $418 million mortgage assistance for distressed homeowners in Florida is spoiling Americans into constantly expecting help.
"It's not up to our government to bail out every hard-hit person," she says of Florida's proposal, which is currently under review by the U.S. Treasury and is expected to take effect later this summer. "Whatever happened to the American spirit of trying to pick ourselves up from our boot-straps?"
The Florida Housing Finance Corporation, which is managing the program, says it's not about bailing out foolish investors, but helping average Floridians who were caught off-guard by the massive economic crisis. Only those who can prove true hardship -- such as blameless loss of a job or government benefits -- can qualify, says FHFC spokeswoman Cecka Rose Green.
"This way we're actually hoping to help those who need it, not just those who made some bad investment decisions," she says.
Florida is one of 10 states that will be receiving money as part of a $2.1 billion federal program to help distressed homeowners pay their mortgages.
The money comes from a special housing component within the Troubled Asset Relief Program (TARP) known as the Housing Finance Agency Innovation Fund for the Hardest Hit Housing Markets -- HFA Hardest-Hit Fund for short.
The first five states to qualify -- Arizona, California, Florida, Michigan and Nevada -- recently submitted their proposals to Treasury for approval and are expected to implement them this summer. Another five states -- Rhode Island, South Carolina, Oregon, North Carolina and Ohio -- are still waiting for federal guidelines.
Monthly Payments
States that have already submitted their plans have taken a variety of approaches. Under Florida's proposal, for example, the state would make nine months of mortgage payments on behalf of homeowners as long as lenders agree to forgive another nine months of payments.
In Arizona, the state would match a bank's forgiveness of principal with payments of up to $50,000.
Critics of the program have been pointing out what they say are its flaws since it was announced in February. The biggest complaint has been that it takes taxes paid by responsible Americans to bail out those who bought more home than they could afford.
Alex Pollock, former CEO of Federal Home Loan Bank of Chicago and now a research fellow at the conservative American Enterprise Institute, says using TARP money to bail out homeowners isn't even legal.
