The U.S. Treasury’s $10 billion question

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Hello, LOs!

States are finally beginning to roll out their Homeowners Assistance Fund programs. How are they shaping up?

You may remember that Congress created the U.S. Department of the Treasury-administered $10 billion facility when it passed the $1.9 trillion American Rescue Plan back in March. Six months later, states are still awaiting Treasury approval of their plans. Twelve states have implemented pilot programs so far, according to the National Council of State Housing Finance Agencies.

Most of the funds must be targeted to homeowners making no more than 100% of the state or national area median income.

How exactly the remaining funds are prioritized is up to individual states, so eligibility will vary state by state. Often, in designing large-scale programs, smaller states take cues from larger states. So it's instructive to keep an eye on how larger states — California, Texas, New York — craft their assistance programs.

In California, under the CalHFA Homeowner Relief Corporation's program, which awaits Treasury approval, a household of two in San Diego county making $97,000 a year could be eligible for the assistance. But a household of two making $98,000 definitely would not. CalHFA estimates that the program would assist 20,000 to 40,000 households with $80,000 available per home.

Targeting assistance is a double-edged sword. The overhead increases when there is more complex means-testing, from verifying income eligibility to determining whether or not alternative mortgage workout options. Yet with limited funds, policymakers have to choose which households deserve assistance.

Policymakers are keen to avoid the pitfalls of the rental assistance program, which faced logistical challenges due to complex guidelines meant to discourage fraud. The Urban Institute suggested states use data to target assistance to homeowners at greatest risk of foreclosure.

The clock is ticking for homeowners who need assistance, even if the overall delinquency numbers are trending in the right direction. The delinquency rate tracked by CoreLogic has decreased to 4.2% for all mortgages in the U.S., the lowest rate since March 2021. That's good. But half of those who are delinquent are six months behind.

LOs, I'd like to hear your impression of the Homeowners Assistance Fund so far. It sounds like a lot of money, but is $10 billion an appropriate figure? Do you think the funds will arrive in time to have a meaningful impact?

Georgia Kromrei

Senior Mortgage Reporter, HousingWire

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