Editor's note: This is the third of a four-part series looking at the local impact of the foreclosure crisis.
A pilot of a state-run program aimed at helping those who are out of work avoid foreclosure launches next week, but the criteria to qualify for the assistance are likely to leave many homeowners falling through the cracks.
To get assistance, homeowners have to be less than 120 days behind on mortgage payments and, for one of the programs, must be collecting unemployment, which leaves out many homeowners who are facing foreclosure.
"It's just really disappointing because so many people could really use this assistance to get back on their feet, and it's so limiting right now," said Debbie Kidd, the director of Family Service Inc.'s Homeownership Resource Center.
Kidd said most of the clients the nonprofit housing and foreclosure counseling agency works with don't even come to them asking for help until they are six months behind on payments, which would be too late to qualify for the program. Of the roughly 1,200 cases the agency is working with, fewer than 50 homeowners will qualify under the guidelines, she said.
South Carolina has received almost $300 million through the federal Hardest Hit Fund, which is part of the Troubled Asset Relief Program. On Monday, the state will launch a pilot program to test new foreclosure prevention assistance that should be available statewide by the end of the year, said Clayton Ingram, a spokesman for the S.C. State Housing Finance and Development Authority.
The S.C. Housing Corp. will be administering the program, which will be known as S.C. HELP, or the S.C. Homeownership and Employment Lending Program, with the assistance of nonprofit housing agencies in the state.
Homeowners in the pilot program can qualify for one of two types of assistance: monthly mortgage payments for those who are out of work or a one-time payment to help formerly unemployed homeowners pay off the missed payments and fees.
The program, which was initially touted as a way to help many homeowners who haven't been helped by other programs, will only help a narrow group that qualifies.
Homeowners looking for monthly payment assistance must be collecting unemployment, looking for work, be no more than 120 days behind on their payments and must prove financial hardship. Homeowners who want a reduction in how much they owe to help cover missed payments must be able to document that the hardship was beyond the homeowner's control, that payments were made on time for the year before the hardship event, and the mortgage can be no more that 120 days overdue.
The assistance will be in the form of zero percent interest loans that will be forgiven if the homeowner pays on time and stays in the house for at least five years, Ingram said.
Program changes possible
Kidd said the assistance will only help homeowners who have recently become unemployed or just failed to make a payment, leaving out those who have struggled for months to do a modification and need help too.
"We have some great families we've been working with for a long time, and this is what we were hoping would be the thing to help them save their home," she said. "I'm being optimistic that the state is going to change their policies once they go through the trial program. They're going to have to."
Ingram said the state is open to making changes and said that determining eligibility criteria is one of the purposes of the pilot program.
The state chose to set 120 days past due as the mark for eligibility because after that point a foreclosure has typically been initiated, he said. In addition, homeowners who are fewer than 120 days delinquent are more likely to have positive long-term outcomes, Ingram said. Programs in other states and Treasury guidelines also helped shape the criteria, he said.
Kidd said in many cases banks are waiting six or seven months before even filing a foreclosure notice, and even after that point there is time to work with homeowners and prevent the foreclosure.
Ingram said the state would like to be able to help all homeowners who are facing a hardship, but there just aren't enough resources available.
"With the just knowing the number of people out there, just how far back do you reach? It doesn't matter where you draw the line, someone is going to be left out," he said.
Still hoping for help
For homeowners such as Nicholas Marinelli and his wife, Louise, extra help could mean that they are able to stay in their home, they said. They bought a North Myrtle Beach condo in 2006, but since then Louise Marinelli got hurt, had to give up her job and is now on disability, and Nicholas Marinelli's accounting business has fallen off dramatically, leaving them unable to make their payments.
When they bought the property, they had a 30-year fixed-rate mortgage and paid 25 percent down, but during the past few years, their mortgage rose from about $2,000 a month to $4,000 a month. The bank began the foreclosure process in March and so far the Marinellis haven't been able to work out a loan modification. Nicholas Marinelli has even sent in payments of several thousand dollars only to have them returned because it wasn't the full amount he owes on the property, he said.
"No one is really working with us," Nicholas Marinelli said.
The federal government's Home Affordable Modification Program hasn't helped the Marinellis yet, just like it hasn't worked for other homeowners across the state and country. The program has been widely criticized for its inability to help homeowners avoid foreclosure. In a report released last month, the U.S. Department of Treasury conceded that the number of permanent modifications early in the HAMP program was lower than anticipated.
About 460,000 - or 35 percent of the 1.3 million trial modifications - have become permanent modifications since the HAMP program started in April 2009, according to the report. About 11 percent of homeowners who got the modifications had defaulted again within nine months.
In October, 930,437 properties in the United States were in some stage of foreclosure. There were 1,460 in Horry County and 38 in Georgetown County. Horry County has more foreclosures than the national average, with about one in every 118 properties in some stage of foreclosure, according to RealtyTrac, a company that tracks foreclosures.
Aiming for progress
The modification program is helping more homeowners than when the program launched, said Andrea Risotto, a spokeswoman for the U.S. Department of the Treasury, which administers TARP and the Hardest Hit Fund. But in addition to the modification programs, the Treasury Department has expanded options for struggling homeowners, including through the Hardest Hit Fund.
"It's another tool in the toolbox, really," she said. "Certainly we continue to implement the mortgage modification program. It's a really important part of the administration's broader housing policy."
The Hardest Hit fund was launched in early 2009 when money was given to the five states that had the greatest declines in home prices. The program was expanded this year to provide funding in states that had the highest unemployment rates, including South Carolina.
Horry County's jobless rate was 10.5 percent in September, while Georgetown County's unemployment rate was 10.9 percent. Statewide unemployment ticked down to 11 percent from 11.1 percent. The national unemployment rate stayed at 9.6 percent in October.
"[Treasury] recognized that not only negative equity but unemployment are two issues that many homeowners across the country are struggling with," Risotto said.
Homeowners who are unemployed often cannot qualify for a mortgage modification because they cannot prove their ability to pay off the loan, so the Hardest Hit funds are an alternative, she said.
The Marinellis don't know whether they will qualify for assistance through the state program, but what's clear to them is that they need some help to pay the $24,000 in back payments plus fees they owe.
They've thought about selling the property, but they owe more than it's worth, despite their 25 percent down payment, Nicholas Marinelli said.
Nicholas Marinelli said if he qualified for the Hardest Hit funds, it would be a big help.
"What this might mean, if I could get something to hold me over, to stabilize my economic situation, it would really be a godsend and help me out," he said.
The S.C. State Housing Authority, which designed the program, estimates 20,000 to 33,000 S.C. homeowners will be helped with the Hardest Hit Fund money, Ingram said.
The program was initially supposed to start helping homeowners last month, but additional funding and plan revisions have taken longer than expected, he said.
"We were more optimistic in the beginning that we would be able to get it running more quickly than we were able to," Ingram said.
Once the pilot program is complete, homeowners will be able to apply for the assistance online or by phone.
"We really haven't put an end date on the pilot program," he said. "It will end when we are secure that our system can take applications and process them expeditiously."
The goal is for the pilot program to last no more than 30 days, but there is no firm end date, he said. Other states have started programs quickly and run into problems, something South Carolina wants to avoid, Ingram said.
"We don't want to put more stress on people who are already stressed by having to delay and delay," he said.
The two programs in the pilot program have caps on how much homeowners can receive. Homeowners who receive monthly payment help can get a maximum of $36,000, and those who get a direct loan reduction to help pay off what they owe will have a maximum payment of $10,000 per household in targeted counties and $5,000 in other counties. Targeted counties have the highest unemployment rate within the state, and Horry and Georgetown counties are not among them.
At the end of the trial period, the full roll-out of the program will also offer additional options to homeowners, including a modification program to help homeowners who don't qualify for HAMP, a second mortgage restructuring program and a property disposition program to help homeowners where foreclosure is unavoidable move into a rental property.
Contact ADVA SALDINGER at 626-0317.