Miami Business and Industry Examiner: Florida is part of $1.5 billion housing plan initiative and thankfully so

Florida is part of $1.5 billion housing plan initiative and thankfully so

February 19, 10:17 PM
Miami Business and Industry Examiner
Steve Gara

It was announced Friday that Florida was part of a White Plan that will include other several states as well in a $1.5 Billion dollar initiative to help struggling homeowners.

The new president climbed aboard Air Force One a year ago for a trip to Phoenix to reveal his strategy for attacking the housing crisis. It was a signal moment in the buoyant early days of Barack Obama's administration.

The plan, Obama told a cheering audience of high school students, would keep as many as 9 million people in their homes by lowering their monthly mortgage payments. The program wouldn't save every home, Obama cautioned, but few people paid attention. Not with Treasury Secretary Timothy Geithner saying things like, "You'll start to see the effects quite quickly."

The end of the foreclosure crisis is finally in sight. For the first time in almost three years, the number of homeowners falling behind on their loans is declining.

The drop means the number of people losing their homes will start to fall. But some pain from the crisis is sure to persist. Because millions of people are already in foreclosure, deeply discounted houses will put pressure on home prices for years.

"Housing is on a path to recovery," said Mike Larson, a real estate analyst with Weiss Research. "It's going to be a very long, gradual process."

Citigroup Inc. plans to let homeowners on the verge of foreclosure stay in their homes for six months - if they turn over the deed to their property.

Citi said Thursday it is launching the pilot program, dubbed "Foreclosure Alternatives," this week in Texas, Florida, Illinois, Michigan, New Jersey and Ohio. Initially, about 1,000 homeowners are expected to participate. Citi may expand the program nationwide.

In a normal foreclosure, a lender assumes legal control of the property and evicts the homeowner. But Citi's program, like other "deed in lieu of foreclosure" efforts, allows the homeowner to avoid a completed foreclosure. While the owner must still leave the home after six months, the program results in a less severe hit to the borrower's credit score.

If you think the torrent of foreclosures affecting every city and nearly every neighborhood and street in South Florida is as bad as it can get, here is a harsh new reality:

There's a new wave of foreclosures making its way through the courts that has nothing to do with exotic subprime loans, real-estate flippers out to make a quick buck or people who bought way more house than they could afford.

Now, double-digit unemployment, sagging home prices and a lingering recession are to blame.

One of the biggest challenges to ending the foreclosure crisis is this: A surprising number of homeowners who get their monthly payments reduced fall behind again within a year.

When borrowers get into financial trouble, lenders have several ways to help. They can offer grace periods, longer repayment schedules, lower interest rates or reduced balances.

But nearly 40 percent of homeowners who had their monthly payments cut by 20 percent or more last year were delinquent again within a year, according to a report Monday from the Office of the Comptroller of the Currency and the Office of Thrift Supervision.

The government threw a $1.5 billion lifeline to unemployed and underwater homeowners on Friday, amid a new report suggesting the nation's foreclosure crisis may be easing.

Under the initiative, Florida and four other states that have seen home prices fall by at least 20 percent since their peak, will be eligible to apply for the funds.

The exact amount due the state, and the guidelines for the initiative, will be available in two weeks, the Obama administration said.

Each state's housing authority will be responsible for applying for and administering the program.

In Florida that role will fall to the Florida Housing Finance Corp., based in Tallahassee.

Until now, the 140-person nonprofit agency has concentrated on providing foreclosure counseling.

Other states eligible for the funding are California, Nevada, Michigan and Arizona.

The issue is critical in Florida, where foreclosure rates are the nation's highest.

While home sales have been picking up lately, prices continue to slide. Since the end of 2006, Florida home prices have dropped 37 percent, according to the Federal Housing Finance Agency.