Pennysylvania Foreclosure Prevention Efforts

For 2009, Pennsylvania ranked 33rd among all states in foreclosure rate, an increase of 20.21% from the year before. Nationally, 2009 was the worse year for foreclosures in US history, with 2.8 million property owners receiving a foreclosure notice.

In the state foreclosures must follow a judicial process. The borrower must be at least 60 days late before it can begin. The lender sends an initial letter informing the homeowner of default, presenting options to prevent foreclosure. The homeowner gets a grace period of 2-4 months to resolve the situation. At least 30 days before the foreclosure auction, the lender files a suit for the amount due. The sale must be advertised at least once a week for three weeks in a row in both a local general interest newspaper and a legal newspaper.

The sheriff gives the homeowner notice of the sale, by posting it on the property and delivering a copy to the homeowner. The borrower can forestall the foreclosure up to an hour beforehand by paying off the mortgage. There is no right of redemption for borrowers following the sale.

To help its citizens avoid foreclosure Pennsylvania has had a very proactive response to the crisis from lawmakers. It has established several initiatives. “Get Help Now Pennsylvania” is face to face counseling offered by volunteer attorneys and financial professionals between 1:00 PM and 6:00 PM Tuesdays and Thursdays through September 11th. Pennsylvanians are invited to visit these locations or call 1-888-799-4557 for the closest help desk.

The state has established three loan programs:

Refinance to an Affordable Loan Program (REAL) is a way for homeowners to convert an Adjustable Rate Mortgage (ARM) or exotic home loan into a traditional 30 year fixed mortgage at an attractive rate. It’s designed for moderate income homeowners who might not qualify for refinancing otherwise. The criteria are as follows:

• The combined gross annual income of all borrowers may not exceed $120,000. Certain exceptions may apply.
• The homeowner is not more than 59 days past due on the existing mortgage.
• The credit score must be at least 620 or meet all of the following conditions:

1. The mortgage payment adjusted in the last 12 months to a higher interest rate or a fully amortized payment. The borrower has made no more than two 30-day late payments since the adjustment. Prior to the adjustment, the previous year must show no history of late payments.
2. The credit history of all the borrower’s other debt shows no more than three, 30-day late payments in the 12 months prior to the mortgage adjustment.

• The homeowner may borrow up to 100% of the home’s value based on a current appraisal. For borrowers with a credit score below 620 the loan tops out at 95 percent.
• The monthly debt costs from all sources may not be more than 50% of the borrower’s total gross monthly income. For borrowers with a credit score below 620, this debt ceiling is 45%.
• The REAL loan may be used to finance a slew of obligations such as second mortgages, closing costs, prepayment penalties, delinquent property taxes, and arrearages that have occurred within the past 12 months after the ARM reset.

For those meeting these conditions, contact the Pennsylvania Housing Finance Agency (PHFA) at (800) 822-1174 (option #2) to get more details and the name of a participating local lender.

The second option for Pennsylvanians wrestling with unaffordable mortgage payments is the Homeowners’ Equity Recovery Opportunity Loan Program (HERO). It provides for 100% financing. The Pennsylvania Housing Finance Agency purchases the mortgage from the current lender and sets up an affordable payment arrangement. HERO is for Pennsylvanians who don’t meet the criteria for REAL.

To qualify:

• The combined gross annual income of all borrowers may not exceed $120,000, but have sufficient income to sustain automatic bank drafts to pay off HERO. Certain income exceptions may apply.
• Homeowners must have made a good faith effort to meet all their financial obligations. Anyone who has stopped making mortgage payments must show where the money went.
• The mortgaged property is the homeowner’s primary residence.
• HERO must be established as the home’s primary lien.
• Borrowers approved for HERO must attend financial counseling at a PHFA-approved agency.

HERO does the following:

• It provides a fixed-rate mortgage for up to 30 years for up to 100 percent of the home’s current value.
• HERO locks in an affordable interest rate.
• PHFA services the mortgage and won’t resell it.
• Property taxes and insurance are included in the monthly payment.
• PHFA may be able to negotiate with the current lender to reduce the principal and any prepayment penalties.
• The new loan may be used to pay off the current mortgage, any remaining prepayment penalties and delinquent property taxes.

For more contact HERO at 1.800.822.1174 (option #2).

Pennsylvanians’ third loan option is the Homeowners Emergency Mortgage Assistance Program (HEMAP).  It is designed to help citizens of the state who are behind on their mortgages due to a hardship or temporary income reduction and need help to get caught up. HEMAP is a second mortgage used to bring the delinquency current on the first loan. The homeowner is then responsible for making all subsequent mortgage payments while paying off HEMAP.

• All HEMAP loans are limited to a maximum of 24 months from the date of the mortgage delinquency, or to a maximum of $60,000, whichever comes first.
• HEMAP loan recipients are required to pay up to 40 percent of their net monthly income, towards their total housing expenses. The minimum monthly payment/contribution to HEMAP is $25 per month per mortgage assisted.

To find an approved counseling agency that can help a borrower with HEMAP click here then choose the appropriate county from the map.

Here’s a list of US Department of Housing and Urban Development, HUD approved housing counseling agencies in Pennsylvania.

For those trying to refinance or modify their current mortgage with a for-profit firm, the state urges homeowners to check here to see if the new financial institution is licensed by the state

For borrowers victimized by predatory lending practices or fraud these organizations may be able to help:

Office of the Attorney General
Bureau of Consumer Protection
717.787.9707

The Pennsylvania Legal Aid Network, Inc.
717.236.9486 or 800.322.7572

Department of Banking
Hotline: 1.800.PA.BANKS (1.800.722.2657)