The Homeowner’s Emergency Mortgage Assistance Program (HEMAP) has, since its inception, been an innovative, effective and cost-effective program providing assistance to homeowners seeking to save their homes from foreclosure. In the face of the recent demise of the federal Homeowner Affordable Mortgage Program (HAMP), HEMAP now plays an even more crucial role in providing a path to home retention. It is a path that benefits homeowners, lenders and neighborhoods at minimal cost to the government. However, the program’s funding has plummeted in recent years. Future funding for HEMAP is in jeopardy of disappearing entirely, absent action by the state legislature. The consequences of the end of continued funding for the program would be devastating to the thousands of families the program was designed to protect.
HEMAP was enacted by statute in December 1983, a time when very high unemployment was threatening many Pennsylvanians with mortgage default and foreclosure. Administered by the Pennsylvania Housing Finance Agency (PHFA), HEMAP helps homeowners experiencing a temporary loss in income, or other temporary financial emergency, cover a period of missed payments by making a loan to the homeowner in the amount of the mortgage arrearage. The program also provides for a period of limited continuing assistance to enable the homeowner to, for example, regain employment after a temporary layoff. The HEMAP loan proceeds are used to cure the mortgage default. The loan is secured by a second mortgage payable to PHFA, with monthly payments set according to the homeowner’s ability to repay. The lowest monthly payment is $25 per month, putting the program within reach of even Pennsylvania’s poorest and most vulnerable homeowners. Homeowners must demonstrate the default to have been due to circumstances beyond their control (such as job loss, divorce or illness) and that they have reasonable prospects of resuming monthly payments within two or three years, depending on the economic conditions at the time of the loan.
HEMAP’s enacting statute, Act 91 of 1983, 35 P.S. 1680.401c et seq., requires a notice from the mortgage company prior to the initiation of foreclosure proceedings, allowing access to assistance during a critical period when the costs of the foreclosure are poised to sharply increase. The program is designed to help the homeowner avoid those increased foreclosure costs. Because HEMAP provides for repayment by the homeowner of the HEMAP loan over time, or when the property is sold, the program has been, since its inception, able to recoup and re-lend much, though not all, of the funds it has loaned out.
The success of the HEMAP model has been praised for its impact in reducing the loss of homes due to foreclosure and the program has been imitated in other states around the country. During the depths of the mortgage foreclosure crises HUD created a temporary Emergency Homeowner Loan Program (EHLP) which was largely modeled on HEMAP. In 2007, HEMAP was a finalist for Harvard University’s Innovations in American Government Award. A 2012 study by the Reinvestment Fund found that the existence of HEMAP during the foreclosure crisis reduced Pennsylvania’s foreclosure rate from what would have been 2.28 percent absent the HEMAP program to 2.17 percent in 2008, and from 3.39 percent to 3.24 percent in 2010. The estimated financial impact of foreclosures prevented by HEMAP during the period of 2008-2010 was $480 million, a six-fold return on the cost of the program. Importantly, mortgage lenders were the recipient of a significant portion of the financial benefit of the program. They were estimated to have saved $308.1 million in costs between 2008 and 2010 because of HEMAP. As of 2011, more than 47,000 homeowners had received assistance from HEMAP. At that time 85 percent of the HEMAP loan recipients were repaying their loans as agreed.
Despite the documented success of the program and its widespread financial benefits, HEMAP faces the prospect of being unable to continue making loans for lack of funding. On June 22, 2012, Pennsylvania passed legislation to use funds from the National Mortgage Settlement to fund HEMAP. HEMAP received an initial $6 million of those funds and close to $12 million a year of settlement funds for the succeeding five years. This amount represented a reduction from funding by the legislature in preceding years, but allowed HEMAP to continue to play an essential role in preventing foreclosures as a compliment to the plethora of other programs embodied in HAMP, which programs continued to the end of 2016 when most of the HAMP programs ended.
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