U.S. Money to Save N.C. Homes
North Carolina will receive $159 million as part of a federal aid package designed to fight foreclosures in states plagued by high unemployment.
The $600 million package announced Monday by the Obama administration is the latest sign that the nation's foreclosure problem has spread from subprime borrowers to the growing number of people who can't find work.
"The first wave of foreclosures had more to do with subprime loans, but right now many of the foreclosures in North Carolina are because of the surge in unemployment," said Charlene Crowell, communications manager for state policy and outreach at the Center for Responsible Lending in Durham. "A little bit of money will help. It won't solve all the problems, but it certainly comes at a time when many North Carolinians are needing help."
Portions of the state have seen a jump in foreclosure filings so far this year. Filings in Durham, Johnston, Orange and Wake counties jumped 72 percent - to 1,516 - in January and February compared with the first two months of 2009. Not every filing results in a foreclosure.
There were 2.8 million foreclosure filings nationally in 2009, and that number could exceed 3.5 million this year, according to RealtyTrac Inc., a research firm based in Irvine, Calif.
Such predictions have caused the Obama administration to step up its efforts over the last six weeks to prevent foreclosures.
Last month, the administration pledged $1.5 billion for states that have seen the biggest decline in housing prices: Arizona, California, Florida, Michigan and Nevada. On Friday, federal officials announced a plan to reduce the amount some distressed borrowers owe on their home loans and give unemployed homeowners temporary relief.
Critics of these efforts question whether such programs are simply rewarding borrowers who acted irresponsibly during the housing boom.
North Carolina's allocation will go to the N.C. Housing Finance Agency, whose mission is to provide affordable housing options to residents.
Margaret Matrone, the agency's director of government relations and communications, said it's too early to say what exactly the $159 million will be used for because Treasury officials won't announce the rules governing the program for another two weeks.
Matrone noted that the agency already has several foreclosure prevention projects. One provides loan payments to people while they look for a job or are retrained. Another program, which received $6.5 million in federal grant money, counsels homeowners who are in danger of losing their houses.
"We feel like we're in really good shape to do it," Matrone said.
Treasury: Think locally
In announcing the $600 million aid package, administration officials emphasized that they want the solutions to come from the local level.
"We're looking for innovation at the local level in these markets," Diana Farrell, deputy director of the WhiteHouse's National Economic Council, said on a Treasury conference call, Bloomberg News reported. "We want to stabilize the markets and prevent foreclosure."
Of the five states receiving portions of the $600 million, only Ohio received a larger allocation than North Carolina.
The sizes of the allocations were determined by the number of people living in counties with unemployment rates of more than 12 percent.
North Carolina's overall unemployment rate was 11.2 percent in February, and more than half the state's 100 counties register rates above 12 percent.
Laws for homeowners
Earlier this month, state banking regulators announced several rule changes designed to fight foreclosures.
Beginning June 1, once a homeowner asks for a loan modification, any foreclosure actions must be halted. Under current rules, lenders can pursue foreclosures at the same time they're working with homeowners to make their loan payments more manageable.
The second new regulation requires mortgage servicers to respond clearly and promptly when homeowners ask for mortgage assistance. A breakdown in communication can lead to foreclosure.
