In 2007, the housing and mortgage markets crashed hard…very hard. The real estate market began to spiral downward in a self-feeding crash that left many families in the US facing homelessness. In 2010, the Federal Government created the Hardest Hit Fund (HHF) to help families save their homes. Originally, $1.5 billion was allocated to assist families, but available funds have increased to $9.6 billion. This means that note buyers have a tool to not only convert nonperforming loans into more profitable performing loans, but they have the opportunity to help families in need.
States that are included in the Hardest Hit Fund program need to have either unemployment above the national average or the state has to have seen price declines greater than 20%. Each state has different rules for the HHF funds, but most focus on unemployed or underemployed families, principle reductions to help make mortgages more affordable, and areas were blight has started to creep in.
Servicers have made the HHF program and other programs like it part of their delinquent loan resolution programs. Note buyers should familiarize themselves with these programs to ensure that servicers are using the programs to augment the value of the note buyers’ portfolios.
As of now, the program is scheduled to end by the end of 2020, but with recent events surrounding the Covid 19 virus, one never knows what programs congress will come up with to assist struggling borrowers. As venues shut down such as restaurants and retail stores, we’re facing another round of borrowers that will struggle to make payments on their obligations. It would be surprising if new programs weren’t created or current programs extended to not only assist homeowners, but also help loan holders to continue to have the liquidity they need to continue to offer loans to borrowers.
Programs such as the Hardest Hit Fund are another tool in your arsenal to solve delinquent loan issues in your note portfolio. It’s a shame that many note buyers haven’t taken the time to understand the programs and how they might benefit them and their borrowers.