Michigan is home to some of the biggest home default rates in the U.S. — and now the state wants to do something about that. The state is the first to roll out its own home foreclosure avoidance program — and other states will no doubt keep a close eye on how Michigan performs.

There is a caveat. Even though Michigan is running the program itself (called the Helping Hardest-Hit Homeowners Fund) the $154.5 million heading toward Michigan is part of a $1.5 billion fund that the federal government earmarked for states hardest hit by the housing bust in February. Michigan, along with Ohio, Arizona, California and Florida are all at the top of that list.

But Michigan is the first of those states to offer direct help from the federal government to state homeowners behind on their mortgages.

The fund will be run by the Michigan State Housing Development Authority and will seek to help at least 17,000 statewide homeowners facing a home foreclosure. Those in particular need are unemployed homeowners or homeowners who can’t pay their bills because they’re dealing with a major illness or surgery.

The MSHDA site provides specific details on who is first in line for the foreclosure aid:

  • Mortgage payment assistance for homeowners currently receiving unemployment compensation.
  • Rescue funds for homeowners who have fallen behind in their mortgage payments due to no fault of their own and who have overcome this obstacle.
  • Federal matching funds for principal reductions for homeowners who can no longer afford their mortgage payments as a result of reduced income.

Through the Hardest-Hit Fund, unemployed homeowners can receive monthly subsidies, paid directly to the mortgage lender, of up to $750 or 50% of the required monthly mortgage payment. Funding will be provided for 60 days after the homeowner returns to work, with the maximum length of assistance locked in at 12 months.

Mortgage lenders aren’t forced to participate in the program, but the fund has backers from the Michigan Banker's Association and the Michigan Association of Community Bankers. The first day of the launch was July 12, with demand so high from Michigan homeowners that the state has had to beef up staffing to handle paperwork coming in from both mortgage holders and mortgage lenders.

According to MSHDA Interim Executive Director Gary Heidel, "We are going to distribute these funds as quickly and efficiently as possible, because we know the devastation that can come from a home foreclosure. The message we're giving homeowners is to call their mortgage servicer immediately if they believe they are at risk of losing their home so that they can determine if they qualify for this program."

Beleaguered homeowners won’t have to wait too long to get relief. According to Heidel, final approval of an application is expected to occur within 48 hours of receipt of a complete application package. The agency expects that it will take up to 18 months to distribute all the money available in the Hardest-Hit Fund.

Eligible homeowners can obtain more information regarding the Helping Hardest-Hit Homeowners Fund by calling 866-946-7432 or visiting Michigan.gov.

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