Florida Offering Aid to Underwater Home Borrowers
Thousands of Florida homeowners who are “underwater,” or owe far more on mortgages than their houses are worth, could get a break of up to $50,000 if they qualify under a new state program. The Florida Housing Finance Corp. said people who meet eligibility requirements will be able to apply online for money to reduce mortgage principal beginning Wednesday, September 25 under the $350 million plan. The program is restricted to homeowners whose mortgages are 125 percent or more than the current market value of their house, which is considered to be “severely underwater” on a mortgage.
The program, formally known as the Florida Hardest Hit Principal Reduction Program, also predicts that most affected mortgages will be refinanced or recast, reducing monthly payments.
“For those who qualify, this new program can help to reduce their principal balance, which can result in a lower monthly payment and put more money in their pockets,” said Steve Auger, Florida Housing’s executive director.
The online application process will begin at 9 a.m. on Wednesday at www.principalreductionflhhf.org. The unpaid balance of the mortgage cannot exceed $350,000.
Initially, the program will be restricted to 25,000 applications on a first-come, first-served basis but could be expanded, Auger said. The money is just a portion of the $1 billion Florida has received under a federal program aimed at states where housing suffered the most during the economic recession.
At least 200,000 underwater homeowners in Florida could probably qualify for the program, said David Westcott, director of home ownership programs at Florida Housing. Out of the 25,000 initial applications, Westcott said he expects about 10,000 homeowners will actually qualify for the money.
Craig Barrett, co-owner of NBI Properties and NBI Residential in Fort Walton Beach, said that his agency is advising clients who qualify to make claims as early as possible.
“We’re encouraging people to get all of their records and paperwork in order and be ready to apply first thing on Wednesday morning,” he said. “It sounds like a lot of aid is available, but that money could potentially be dispersed very quickly.”
Among the other requirements to qualify:
• Homeowners must be Florida residents and legal U.S. residents and must occupy the house as a primary residence.
• Total household income for everyone 18 and older living in the home cannot exceed 140 percent of the area’s median income.
• Mortgage payments must be current, and a payment cannot have been 60 or more days late in the past 24 months.
• The mortgage had to originate prior to Jan. 1, 2010.
The money will be provided in what’s called a forgivable loan. Depending on the type of loan, it will either be forgiven in 20 percent increments over a five-year period or forgiven in total at the end of five years.
“If the home is sold before the five years are up, the homeowner would have to repay the remaining, unforgiven amount of the loan – provided there’s enough money from the sale,” added Barrett.