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Strategy shift for Florida’s $1 billion foreclosure prevention program

Florida’s largest foreclosure prevention plan may dedicate $50 million to make downpayments for first-time homebuyers as the housing market shifts to recovery and a deadline approaches to spend hundreds of millions of dollars.

The downpayment proposal, which was rejected in a similar form by the U.S. Department of Treasury in 2010, is a strategic shift for the more than $1 billion Hardest Hit Fund. Created with taxpayer money, the program has focused on staving off bank repossessions with mortgage assistance, principal reductions and payment of back loan debt.

If approved, Florida would be the first state nationwide to use federal Hardest Hit foreclosure prevention money to help people buy homes.

The Florida Housing Finance Corp., which oversees the state’s Hardest Hit program, has through 2017 to empty its coffers. About $573.5 million of the $1.05 billion award has been committed, and housing officials hope the Treasury Department will be more amenable today to a plan that would award eligible homebuyers up to $15,000 for downpayments.

“I can make a pretty strong argument that downpayment assistance is a good use of those funds,” said Ira Rheingold, executive director of the Washington, D.C.-based National Association of Consumer Advocates. “We’re coming out of the economic crisis, but there are still a lot of people who cannot afford a home.”

Florida-based consumer advocates expressed more tepid support for the idea, lamenting that so much foreclosure prevention money remains unspent seven years after foreclosures exploded and three years after the housing market began a swift turnaround.

“It is disappointing that Florida wasted time and did not create a program early on that would provide real relief to enough families struggling with their mortgage,” said Alice Vickers, director of the Florida Alliance for Consumer Protection. “However, it makes sense to use some of the funds to help homeowners who lost homes to foreclosure to buy new homes.”

A first-time homebuyer is defined by the Internal Revenue Service and Florida’s program as someone who has not owned a home and occupied it as their principal residence in the past three years.

As of March 1, 22,072 Florida homeowners have been helped by Florida’s Hardest Hit program. The plan, announced in February 2010 by the Obama administration, dedicated $7.6 billion to 18 states and the District of Columbia. The money was to act as a bridge for unemployed or underemployed homeowners until they could find new or better-paying jobs.

Florida’s Hardest Hit money began flowing statewide in 2011. The program has five plans for different homeowner needs including paying up to a year of mortgage payments, paying back loan debt to bring a mortgage current, reducing principal amounts by up to $50,000 and helping reverse mortgage recipients.

Lynn Drysdale, an attorney with Jacksonville Area Legal Aid, said she still sees a need for foreclosure prevention money and would be more supportive of expanding Hardest Hit’s programs over adding a downpayment plan.

“It seems like the bigger problem now is not whether people can buy homes, but can they keep the homes they have at a principal amount equal to the value of the property,” Drysdale said. “I’d say 99.9 percent of the homeowners who come to us are completely underwater.”

There’s no doubt foreclosures have receded in Florida, but through December, there were still 116,692 cases in the state’s court system, including 7,290 in Palm Beach County, according to the Florida State Courts Administrator.

Greenacres resident Elaine Manzi is current on her mortgage payments but woefully underwater after buying her home near the top of the market in 2005 for $339,000. It’s 2014 total market value was $163,520.

The 76-year-old said she applied for the Hardest Hit’s principal reduction plan when it first opened in September 2013 and continued to submit information through 2014 when it was reopened because not enough eligible homeowners applied.

Manzi said she’s still waiting for an answer. A message left for the housing counselor handling Manzi’s case was not returned.

“It’s wonderful they want to help more people, but I’ve jumped through all the hoops, sent in all the information,” Manzi said. “Shouldn’t we get taken care of first, and then they can help people buy a new home?”

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