North Carolina had the second-highest rate of rejecting applications for the funds
A new report from the U.S. Treasury has revealed that un- and underemployed workers in several states, including North Carolina, were denied money from a multibillion-dollar federal fund meant to help those workers keep their homes.
The Treasury expanded its Troubled Asset Relief Program (TARP) in 2010 to include a Hardest-Hit Fund (HHF), writes Consumeris. The HHF included almost $10 billion meant to provide relief to homeowners in 18 states—California, Florida, Michigan, Nevada, North Carolina, Ohio, Arizona, Oregon, Rhode Island, South Carolina, Alabama, Georgia, Illinois, Indiana, Kentucky, Mississippi, New Jersey, and Tennessee—as well as the District of Columbia.
Although these funds come from federal programs, they are then administered by housing finance agencies at the state level. Homeowners in need of relief apply for help from the HHF. Then, if the state approves their application, it collaborates with the homeowner's mortgage servicer, which ultimately gets the funds either in one lump sum or in month payments.
Most of the HHF money—70 percent—has already been claimed through these agencies. However, the Special Inspector General for TARP (SIGTARP) has released a new report showing that certain states rejected the applications of some of the homeowners who most needed the money.
The SIGTARP discovered that 85,000 applicants who earned less than $30,000 per year were denied. With a total of more than 47,000 rejected applications between them—a number that accounts for roughly 55 percent of all denials for low-income homeowners—the states with the most denials for these applicants included Florida, Michigan, California, and Georgia.
In 12 out of the 19 HHF states, such low-income homeowners accounted for at least 70 percent of applicants who were rejected. At 86 percent, Ohio had the highest denial rate, followed by North Carolina and Mississippi, both at 80 percent.
The SIGTARP's report also points out that, while HHF money was often denied for homeowners with low incomes, it was approved for almost 20,000 homeowners earning more than $70,000 annually. This included 6,000 who earned more than $90,000 per year.
The report found high denial rates in Ohio and Michigan for applicants with lower incomes who lived in places close to automotive plants that had either closed or laid off workers. Of the 500 applicants who were denied HHF money and who lived near the General Motors plant in Flint, Michigan, 84 percent earned less than $30,000 per year. More than 90 percent of the rejected applicants living close to closed auto parts suppliers in Dayton, Ohio, also earned low incomes.
Although SIGTARP's data shows that certain states and areas appear to have rejected such low-income applicants in a systematic way, the report does acknowledge that it is hard right now to figure out if this result was deliberate, due to bureaucracy, or caused by other factors.
According to the report, the main difficulty is due to the fact that "State agencies' records provided to SIGTARP were non‐existent, missing or incomplete" on this matter.
The states of Ohio, Nevada, South Carolina, and Arizona did not have any information regarding the reasons why any—or most—such low-income applicants were denied.
For some of the states that did have such information, the SIGTARP sees a need to take a "fresh look" at the criteria that was used to determine applicants' eligibility to receive HHF money. For instance, applicants in Michigan are rejected by the state agency if they have gotten an unemployment check within the past 12 months or if their wages had been reduced more than one year earlier.
In addition, different states have different standards regarding the amount that an applicant's pay has to have been reduced by in order for him or her to be eligible. In both Florida and Oregon, a homeowner's wages have to have been reduced by at least 10 percent; in Michigan, by 20 percent; and in other states, no specific threshold exists.
Michigan will also disqualify applicants whose mortgage payment accounts for more than 45 percent of their income. Applicants for HHF money there also have to wait until their loan has become delinquent.
The result, says the SIGTARP, is that even more Michigan homeowners may be left out in the cold due to such restrictive rules.
"Even good programs can be better," the report concludes. "The Hardest Hit Fund can be more effective and efficient so that the state agencies can help more of America's working class save their home. That is a goal worth striving for, but it takes change, including unlocking the full potential of this program by deleting unnecessary restrictions."