[Federal Register Volume 76, Number 43 (Friday, March 4, 2011)]
[Notices]
[Pages 12127-12129]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-4817]


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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

[Docket No. FR-5470-N-02]


Emergency Homeowners' Loan Program: Announcement of Activation of 
Program and Availability of Emergency Assistance

AGENCY: Office of the Assistant Secretary for Housing--Federal Housing 
Commissioner, HUD.

ACTION: Notice.

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SUMMARY: This notice announces the reactivation of the Emergency 
Homeowners' Loan Program, originally established by statute in 1975, 
and reauthorized, with certain modifications, by the Dodd-Frank Wall 
Street Reform and Consumer Protection Act, which also made $1 billion 
in funding available for this program. The Emergency Homeowners' Loan 
Program provides emergency mortgage relief to homeowners who are 
unemployed or underemployed and at risk of foreclosure and who meet 
certain requirements of the program. This notice sets out the 
requirements and procedures by which emergency relief will be made 
available to eligible homeowners.

DATES: Effective Date: April 4, 2011.

FOR FURTHER INFORMATION CONTACT: Office of Housing Counseling, Office 
of Housing, Department of Housing and Urban Development, 451 7th 
Street, SW., Washington, DC 20410; telephone number 202-708-0317 (this 
is not a toll-free number). Persons with hearing or speech impairments 
may access this number through TTY by calling the toll-free Federal 
Information Relay Service at 800-877-8339.

SUPPLEMENTARY INFORMATION:

I. Activation of Emergency Homeowners' Loan Program

    The Emergency Housing Act of 1975 (12 U.S.C. 2701), signed into law 
on July 2, 1975, conferred on HUD, through title I of the statute, 
entitled the ``Emergency Homeowners' Relief Act,'' standby authority to 
provide emergency assistance, including emergency mortgage relief loans 
or advances of credit, and to make emergency mortgage assistance 
payments for the benefit of certain eligible homeowners to defray their 
mortgage expenses so as to prevent widespread mortgage foreclosures and 
distress sales of homes resulting from a homeowner's substantial 
reduction in income resulting from temporary involuntary loss of 
employment or underemployment due to adverse economic conditions. The 
Dodd-Frank Wall Street Reform and Consumer Protection Act (Pub. L. 111-
203, approved July 21, 2010) (Dodd-Frank Act) revised and reauthorized 
this 1975 statute, and makes available $1 billion to HUD to implement 
the Emergency Homeowners' Loan program during Fiscal Year (FY) 2011. 
HUD is reinstating the 1975 program, with such modifications as 
necessary to mirror the statutory changes made by the Dodd-Frank Act, 
that provide the regulatory framework by which emergency assistance may 
be provided to eligible homeowners. This notice announces the 
activation of the Emergency Homeowners' Loan Program (EHLP), and the 
availability of emergency mortgage relief payments for eligible 
homeowners.

II. Emergency Homeowners' Loan Program Funding for FY 2011

    For FY 2011, HUD will administer funding under EHLP, as follows:

A. Counseling for Homeowners

    HUD, through a network of HUD-approved housing counselors, and 
other such organizations, will provide homeowners with services that 
include but are not limited to:
     Developing and disseminating program marketing materials;
     Providing an overview of the program and eligibility 
requirements;
     Conducting initial eligibility screening (including 
verifying income);
     Counseling homeowners, including providing information 
concerning available employment and training resources;
     Collecting and assembling homeowner documentation; and
     Providing transition counseling by exploring with the 
homeowner other loss mitigation options, including loan modification, 
short sale, deed-in-lieu of foreclosure, or traditional sale of home.

B. Intermediary to Perform Funds Control and Mortgage Servicing 
Functions

    Pursuant to statutory authority to make such delegations, HUD may 
contract with a fiscal agent to provide general accounting and fiscal 
control services, including collecting payments from homeowners, 
distributing emergency mortgage relief payments to servicers on a 
monthly basis, performing

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accounting, managing loan balances, and providing payoff information.

C. States With Substantially Similar Programs

    One of the changes enacted by the Dodd-Frank Act was to authorize 
the Secretary to allow emergency assistance to be administered by 
states with existing programs that provide substantially similar 
assistance to homeowners. On November 12, 2010, HUD published a notice 
in the Federal Register (75 FR 69454) that described key features of 
HUD's emergency mortgage relief payment program for homeowners, and 
which solicited applications from states that have existing programs 
that may be substantially similar to the EHLP (EHLP Substantially 
Similar Program). (See http://www.hud.gov/offices/hsg/sfh/hcc/ehlp/ehlphome.cfm.)

D. Emergency Mortgage Relief Payments

    To the extent that a state does not submit information about an 
existing program that provides substantially similar assistance to 
homeowners, or such submission does not meet the requirements outlined 
in HUD's November 12, 2010 notice, HUD will administer the EHLP in that 
state in accordance with the requirements of Section III of this 
notice.
    The regulations in 24 CFR part 2700, as applicable to emergency 
mortgage relief payments, apply to the emergency mortgage relief 
payments made available through this notice, including use of defined 
terms, eligibility requirements for the homeowner, and mortgaged 
property, unless otherwise superseded by requirements of this notice. 
To minimize cross-reference to the regulations, some defined terms and 
regulatory requirements are repeated in this notice.

III. HUD's Emergency Mortgage Relief Payments Program for 2011

A. Homeowner Eligibility

    To be eligible for emergency assistance under the EHLP in FY 2011, 
a homeowner must have experienced a substantial reduction in income due 
to involuntary but temporary unemployment or underemployment resulting 
from adverse economic conditions or medical conditions (referred to as 
the Event) and meet the requirements set forth in section III.A of this 
notice. Accordingly the following requirements determine the 
eligibility of the homeowner to receive emergency mortgage relief 
payments.
    1. Income Thresholds. The homeowner, whose income (annual adjusted 
gross income as ``income'' is defined in 24 CFR 2700.5) is combined 
with the income of all mortgagors and/or co-signers on the delinquent 
mortgage and note,\1\ must have a total pre-Event income equal to, or 
less than, 120 percent of the area median income (AMI), as determined 
by HUD, of the area in which the homeowner's principal residence is 
located, and which income includes, but is not limited to, wage, 
salary, self-employed earnings, and other adjusted gross income.
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    \1\ Mortgagors and co-signers who are covered by this provision 
do not have to have signed both documents. If only one document is 
signed by an individual, both are covered under this provision.
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    2. Substantial Income Reduction. The homeowner, whose income is 
combined with the income of all co-makers and/or co-signers on the note 
secured by the delinquent mortgage and the other mortgagors on the 
delinquent mortgage, must have a current monthly income that is at 
least 15 percent lower than the homeowner's pre-Event monthly income, 
with such reduction resulting from the homeowner's involuntary but 
temporary unemployment or underemployment due to adverse economic 
conditions or medical conditions.
    3. Employment. With respect to employment, the homeowner may be a 
wage and salary worker or may be self-employed.
    4. Delinquency and Likelihood of Foreclosure. The homeowner and all 
co-makers and/or co-signers on the note secured by the delinquent 
mortgage and all other mortgagors on the delinquent mortgage must 
certify that circumstances at the time of application for emergency 
mortgage relief payments, including the homeowner being at least 3 
months delinquent on the delinquent mortgage, make it probable that the 
mortgagee will foreclose on the delinquent mortgage.
    5. Ability to Resume Repayment. The homeowner must have a 
reasonable likelihood of being able to resume repayment of the 
delinquent mortgage obligations, and meet other housing expenses and 
debt obligations when the homeowner regains full employment, as 
determined by:
    a. The homeowner's income, combined with all mortgagors and/or co-
signers on the delinquent mortgage and note, must have a back-end ratio 
or debt-to-income (DTI) below 55 percent (principal, interest, taxes, 
insurance, and revolving and fixed installment debt divided by total 
monthly income). For this calculation, homeowner's combined income will 
be measured at the pre-Event level.
    b. Homeowners with second mortgage debt or an equity line of credit 
(ELOC) are not disqualified from receiving emergency mortgage relief 
payments. Applicants with second mortgage payments or ELOC payments 
whose DTI ratio is within the program's 55 percent limit may still 
qualify for emergency mortgage relief payments based on all other 
program eligibility criteria.
    6. Principal Residence. The homeowner must occupy the mortgaged 
property as the homeowner's principal residence. The mortgaged property 
must also be a single-family residence (1-to 4-unit structure, or 
condominium, cooperative, or manufactured home).

B. Terms and Conditions of Emergency Mortgage Relief Payments

    1. Declining Balance Loans. The repayment mechanism for the 
emergency mortgage relief payments made on behalf of the homeowner to 
the mortgagee shall be a declining balance, deferred payment, non-
recourse, subordinate loan with zero interest. The declining balance 
loan will cover emergency mortgage relief payments provided for 
arrearages, including delinquent taxes and insurance, in accordance 
with section III.B.2., and up to 24 months of monthly payments on the 
homeowner's delinquent mortgage to include principal, interest, 
insurance, taxes, and hazard insurance, in accordance with section 
III.B.3.
    2. Use of Funds for Arrearages. Emergency mortgage relief payments 
shall be used to pay 100 percent of the eligible homeowner's delinquent 
mortgage arrearages (such as mortgage insurance, principal, interest, 
insurance, taxes, hazard insurance, and ground rent, homeowners' 
assessment fees, late fees, condominium fees, and certain foreclosure-
related legal fees and late payments, if any) on the homeowner's 
delinquent mortgage.
    3. Homeowner Contribution Payments. The homeowner contribution to 
the delinquent mortgage monthly mortgage payment shall be set at 31 
percent of the sum of the eligible homeowner's monthly income at the 
time of EHLP application and the monthly income of all other mortgagors 
and co-signers (if applicable) of the delinquent mortgage and note at 
the time of EHLP application, but in no instance will the homeowner 
contribution to the monthly mortgage payment be less than $25 per 
month.
    4. Use of Funds for Continuing Mortgage Assistance. Monthly 
emergency mortgage relief payments on the delinquent mortgage shall be 
made to the mortgagee or servicing institution

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in combination with the homeowner contribution payments.
    5. Duration of Emergency Mortgage Relief Payments. If at any time 
the homeowner's monthly income, including all other co-makers and co-
signers of the note secured by the delinquent mortgage and other 
mortgagors on the delinquent mortgage, increases to greater than 85 
percent or more of its pre-Event income level, emergency mortgage 
relief payments will be phased out over a 2-month period. In any event, 
the aggregate amount of emergency mortgage relief payments provided to 
any homeowner shall not exceed the earlier in occurrence of: (i) The 
receipt of $50,000, or (ii) 23 months beyond the date of the first 
payment (this period includes the first emergency mortgage relief 
payment, which is inclusive of the first monthly emergency mortgage 
relief payment, and the payment of arrearages).

C. Repayment Terms

    1. Transition Counseling. A housing counseling affiliate shall 
contact each homeowner who is approaching the last months of EHLP 
participation and who remains unemployed or underemployed 
(approximately 3 to 5 months before the emergency mortgage relief 
payments end) and require the homeowner to meet with a HUD-approved 
counseling agent to explore alternative available options, such as loss 
mitigation, loan modification, short sale, deed-in-lieu of foreclosure, 
or traditional sale of home.
    2. Repayment of Emergency Mortgage Assistance Payment. As a 
condition of the homeowner's approval for participation in the EHLP, 
the homeowner shall execute an EHLP Note and EHLP Mortgage in the 
amount of EHLP funds, which may not exceed $50,000. The EHLP Mortgage 
shall be secured by the mortgaged property in either second- or third-
lien position (as applicable depending on the existence of a second-
lien mortgage). The EHLP Note shall be in the form of a 5-year deferred 
declining balance, zero interest, nonrecourse note with a term of up to 
7 years.
    3. Terms for Declining Balance Feature. No payment is due on the 
EHLP Note during the term of the EHLP Note, so long as the homeowner 
remains current on the homeowner contribution payment while receiving 
emergency mortgage relief payments and on the homeowner's full monthly 
payments on the delinquent mortgage once the homeowner is no longer 
receiving emergency mortgage relief payments. If the homeowner meets 
this requirement, the balance due on the principal balance of the EHLP 
Note shall decline by 20 percent of the original principal amount, 
annually, until the balance owed on the EHLP Note is extinguished.
    4. Ongoing Qualification of Homeowner. After initial income 
verification at intake, the homeowner shall be required to notify the 
housing counseling agency of any changes in the homeowner's income and/
or employment status during the entire period in which emergency 
mortgage relief payments are provided.
    5. Termination of Emergency Mortgage Relief Payments. Emergency 
mortgage relief payments will terminate and the homeowner will resume 
full responsibility for meeting the monthly payments on the delinquent 
mortgage in the event of the occurrence of one or more of the following 
circumstances:
    a. The homeowner has received 24 months of emergency mortgage 
relief payments or assistance in the amount of $50,000, whichever 
occurs first;
    b. The homeowner fails to report changes in employment status or 
income within 15 days of the change;
    c. The homeowner's monthly income, combined with that of all 
mortgagors and/or co-signers on the delinquent mortgage and note, 
increases to greater than 85 percent or more of its pre-Event income 
level;
    d. The homeowner sells the mortgaged property or refinances the 
mortgaged property for cash-out;
    e. The homeowner defaults on the homeowner contribution payments; 
or
    f. The homeowner defaults on the delinquent mortgage.
    6. Events Triggering EHLP Note Repayment. The homeowner will be 
responsible for repayment of the outstanding balance of the EHLP Note, 
if, at any time during the term of the EHLP Note, one or more of the 
following events occur:
    a. The homeowner defaults on the homeowner contribution payments 
while receiving emergency mortgage relief payments or on the full 
monthly payment owed on the delinquent mortgage once the homeowner is 
no longer receiving emergency mortgage relief payments; or
    b. The homeowner sells the mortgaged property, resulting in net 
proceeds to the homeowner, and satisfies the outstanding balance on the 
EHLP Note or the homeowner refinances the mortgaged property and 
satisfies the outstanding balance on the EHLP Note. Net proceeds from 
sale of the mortgaged property shall be an amount equivalent to the 
contract sales price of the mortgaged property less applicable brokers 
fees, payoff of first- and (if applicable) second- and third-lien 
mortgage balances, and an allowance of $2,000 to the homeowner for 
relocation expenses. Net proceeds shall go towards satisfying the EHLP 
Note. In the event that net proceeds are not sufficient to satisfy the 
outstanding balance of the EHLP Note, any outstanding balance in excess 
of net proceeds shall be written off by HUD and net proceeds shall be 
sufficient to fully satisfy the EHLP Note and the EHLP Mortgage against 
the mortgaged property shall be released.
    In the event of a cash-out refinance of the homeowner's delinquent 
mortgage (and/or second mortgage, as applicable), the outstanding 
balance of the EHLP Note shall be repaid from remaining cash-out 
proceeds available after the homeowner's delinquent mortgage (and/or 
second mortgage, as applicable) has been paid off, including the 
payment of all applicable closing costs, and the EHLP Mortgage against 
the property shall be released.
    In the event remaining cash-out proceeds from a cash-out mortgage 
refinance are not sufficient to satisfy the outstanding balance of the 
homeowner's EHLP Note, any outstanding balance in excess of net 
proceeds shall be written off by HUD and the remaining cash-out 
proceeds shall be sufficient to fully satisfy the EHLP Note and the 
EHLP Mortgage against the mortgaged property shall be released.
    7. Administration of Emergency Homeowners' Loans. HUD will work 
with its fiscal agent in the states that have been allocated funding 
for the EHLP, but are not a part of the EHLP Substantially Similar 
Program, to make emergency mortgage relief payments to eligible 
homeowners under this notice and the regulations in 24 CFR part 2700.

    Dated: February 28, 2011.
David H. Stevens,
Assistant Secretary for Housing--Federal Housing Commissioner.
[FR Doc. 2011-4817 Filed 3-3-11; 8:45 am]
BILLING CODE 4210-67-P