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In February, the Michigan State Housing
Development Authority (MSHDA) was selected as one of five state housing
finance agencies (HFAs) to receive financial aid through the administration
's HFA Hardest-Hit Fund. But before these funds
can be used, each HFA must submit a program design to be approved by the
U.S. Department of Treasury.

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MSHDA has done just that. The agency recently submitted its plan
to the Treasury, detailing its intentions to use the majority of its
$154.5 million allocation to help unemployed borrowers. Through a nonprofit
corporation set up specifically for the purpose of being an "eligible
entity" under the Hardest-Hit Fund, MSHDA plans to administer three
programs, including the Unemployment Mortgage Subsidy Program, the Principal
Curtailment Program, and the Loan Rescue Program.

These three programs are projected to help more than 16,000 borrowers avoid
the devastating personal effects of foreclosure, while reducing the
secondary but destructive impact foreclosures have on neighbors,
neighborhoods, local government budgets, and the social services network.

Almost 65 percent of the state's total allotment will be directed to the
Unemployment Mortgage Subsidy Program, which will subsidize up to half of
the required monthly mortgage payment for borrowers who are unemployed while
they seek new employment. Homeowners who have lost their job through no
fault of their own and qualify to receive unemployment benefits will apply
for assistance through their lender, who will in turn transmit the
application to MSHDA for approval.

Under this program, unemployed homeowners will be eligible to receive
monthly subsidies, paid directly to the lender/servicer, of up to $750 or 50
percent of the required monthly principal, interest, taxes, and insurance
mortgage payment. Assistance will be provided for two months after the
homeowner returns to work, with the maximum length of assistance set at 12
months.

MSHDA anticipates using 20 percent of the funding for the Principal
Curtailment Program. This program will provide one-time matching funding of
up to $10,000 to homeowners seeking to modify their loans. The lender or
servicer must agree to provide matching forgiveness of principal overhand
and to modify the reduced loan balance consistent with program requirements.

As with other programs, the Principal Curtailment Program will prevent
avoidable foreclosures by helping homeowners who currently cannot refinance
or modify their mortgages due to negative equity positions, MSHDA said.
Homeowners will benefit from both a restructured loan payment and the
reduction in principal balance that must be serviced, reducing monthly
payment and increasing sustainability. The agency expects this program to be
of particular benefit to recently unemployed borrowers who are back to work
at lower salaries.

Another 10 percent of the state's Hardest-Hit Fund allocation will be used
for the Loan Rescue Program. MSHDA said many Michigan families have
encountered some significant obstacle in their lives that resulted in
mortgage delinquency, and this program will provide up to $5,000 in
assistance to household who can now sustain homeownership, catch up on
delinquent payments, and avoid foreclosure. In many cases, the Loan Rescue
Program will be coordinated with existing mortgage modification programs to
help borrowers restructure their mortgage to sustain homeownership.

MSHDA said it consulted with several outside partners during the initial
development of this plan, including the Michigan Bankers Association, the
Michigan Credit Union League, the Michigan Association of Community Bankers,
the Michigan Association of Realtors, the Michigan Foreclosure Task Force,
and MSHDA's statewide homeownership counseling network. In addition,
servicing staff from a selection of community, regional, and national loan
servicers participated in sessions intended to begin aligning the
application process, data requirements, and the like with existing
lender/servicer systems and infrastructure.

The agency said most of the local, regional, and national loan servicers it
consulted have agreed to integrate the Hardest-Hit Fund programs into their
current loss mitigation waterfall process. The Treasury will review and
approve MSHDA's plan by early June, and funds should be available to
Michigan homeowners by early July.

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