Thousands of Floridians who owe more than their homes are worth could see up to $50,000 pared from their mortgages, thanks to a program launching this week.
But lawyers and consumer advocates say the direct-to-bank payouts are too little, too late and too restrictive, leaving out many "underwater" Floridians who want to stay in their homes.
Starting today, state officials will take applications for the Hardest-Hit Fund's principal-forgiveness program, with 10,000 underwater homeowners expected to cut an average of $35,000 off their loans.
To qualify, residents must live in the home and be current on a mortgage, signed before 2010, with less than $350,000 in outstanding debt.
They must owe more than 25 percent over the home's market value; the owner of a home now valued at $200,000, for instance, would have to have at least $250,000 in mortgage debt.
And their household wages also must be less than 40 percent over the area's median income; in Tampa Bay, that would top out at about $80,000.
But advocates say finding a lower-income family that hasn't missed recent payments on an underwater home will be tough, especially five years after the foreclosure crisis began. Many will not meet the program's strict requirements; many others already lost their homes.
"There are so many conditions, so many hurdles, I just don't see this reaching as many people as they could," said Ken H. Johnson, the real estate faculty director at Florida International University. "It reminds me of an old Bugs Bunny cartoon with insurance: If you're riding an elephant on the Fourth of July, you'll qualify."
State officials defend the first-come, first-serve program as a critical element of the state's $1 billion Hardest-Hit Fund, part of a federal effort launched in 2010 to help the states hurt worst by the housing crisis.
They defend its timing as the logical next phase of the fund's other mortgage-assistance programs, which have been offered to homeowners who lost their jobs or suffered pay cuts.
"Most of the people who were going to strategically default have already made the decision to do that," said Cecka Rose Green, a spokeswoman for the Florida Housing Finance Corp., the public agency that oversees the fund. "Now seemed like the right time."
The 10,000 payouts will cover less than 1 percent of Florida's underwater homeowners; Tampa Bay alone has 200,000 underwater homes. That led one real estate analyst to call the program "pocket change" compared with the flood of underwater loans.
Some advocates argue that the ones who will most benefit from this payout are the banks. Every penny of the $350 million fund will go directly to mortgage servicers themselves, as credits toward the homeowners' debt.
Arguing that the money should go instead toward those facing foreclosure, St. Petersburg lawyer Matt Weidner wrote that it's "yet another example of bank bailouts wrapped up in the delusion of 'relief.' "
Florida's fund has been criticized for slow and problematic payouts. By last year, Hardest-Hit money had helped only about 7,000 Florida homeowners, and dozens of those had a history of foreclosures or bankruptcies. This year U.S. Sen. Bill Nelson called for a federal audit, and the U.S. Treasury announced it would investigate.
The principal-forgiveness money will be given as a 0 percent loan that is forgiven after five years. Homeowners who sell for a profit within that time will be expected to pay some back.
Though the biggest banks have signed on, more than 50 mortgage servicers told officials they will refuse the money, throwing another wrench into the process for some applicants.
Alice Vickers, an attorney with the Florida Consumer Action Network, said it was another well-meaning proposal "sliced and diced" by overly conservative demands. But she added that any money was better than nothing for those lucky few who qualify.
"We've been so whipped around and abused in this process," Vickers said, "we pretty much welcome any piece we can get."
Drew Harwell can be reached at firstname.lastname@example.org or (727) 893-8252.