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Mortgage Crisis: What financial assistance have states provided?

Most states have so far provided no financial aid to homeowners threatened by foreclosure, but fifteen states offer direct financial assistance through short-term loans or mortgage refinancing or both (see figure). States typically target these programs to low- and moderate-income homeowners who have adjustable rate mortgages, by imposing income limits that usually vary by locality. Most of the states offering assistance fund their programs through appropriations or taxable bonds, but some rely, at least in part, on private corporations for financing.

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See detailed table of state financial assistance programs

  • Eleven states1 offer short-term loans to help homeowners facing foreclosure pay off their delinquent mortgage balances. The loans are generally small: limits range from $3,000 in Ohio and Michigan to $60,000 in Pennsylvania. Most loans charge no interest; exceptions are Delaware (3 percent) and Pennsylvania (9 percent). Connecticut, Delaware, North Carolina, and Pennsylvania also offer continuing loans to help some homeowners make ongoing mortgage payments.
  • For example, Delaware homeowners with delinquent mortgages and income below 155 percent of the state median may get mortgage assistance loans through the Delaware Emergency Mortgage Assistance Program. The program offers both continuing and noncontinuing loans of up to $15,000 at a fixed 3 percent simple rate of interest.
  • Eleven states2 have mortgage refinance programs, which generally offer borrowers the opportunity to refinance their existing mortgages into thirty- or forty-year fixed rate loans, usually through the state housing finance authority.
  • Michigan, for example, offers two refinancing options: the Adjustable Rate Mortgage Refinance Program, targeted to homeowners with adjustable rate mortgages, and the Rescue Refinance Program, for homeowners in delinquency. Both programs offer thirty-year fixed rate loans at below-market interest rates to homeowners with household income under $108,000 who purchased homes for less than $224,500.
 
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   Entry 5 of 6