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Hardest Hit Fund has spent millions in Tampa Bay on people who lose homes anyway

The owner of this Largo home received Hardest Hit Fund mortgage assistance, but the house is now in foreclosure. 
The owner of this Largo home received Hardest Hit Fund mortgage assistance, but the house is now in foreclosure. 
Published Sep. 21, 2015

Peter Antoniou of Tampa seemed an unlikely candidate to get back on his feet after the housing bust.

In 2009, a bank foreclosed on Antoniou's luxury condo on Bayshore Boulevard. Yet two years ago, he was approved for up to $42,000 in federal funds to help pay the mortgage on another property he was struggling to keep.

Now, he is about to lose that, too.

Anoniou is among scores of Tampa Bay borrowers who got assistance from the federal Hardest Hit Fund but were unable to resume making mortgage payments on their own after the aid ran out. Since January, banks have served foreclosure notices on him and 84 other bay area residents who also were approved for up to $42,000 in assistance.

The bottom line: Taxpayers spent as much as $3.57 million to bail out 85 people who in all likelihood will lose their homes anyway, a Tampa Bay Times analysis found.

Critics of the Hardest Hit Fund say they're not surprised that a program that is supposed to save homeowners from foreclosure hasn't always lived up to its promise. And critics say the main winners have been the banks, which have gotten a publicly subsidized infusion of cash to their bottom lines.

"All it's done is postpone foreclosure,'' said Jack McCabe, a Deerfield Beach real estate consultant. "Instead of a quicker recovery, we'll be seeing a pile of distressed properties and foreclosures for several more years even though we're five years past the end of the Great Recession and eight since Florida's real estate crash.''

McCabe predicts that the number of Hardest Hit recipients who end up in foreclosure will swell as assistance runs out.

"Unless these folks who are so far under water in their homes receive a principal reduction coupled with mortgage refinancing, 50 percent or more may fail,'' he said. "That means that the funds that were spent for these folks are lost.''

The U.S. Treasury Department created the $7.6 billion Hardest Hit Fund in 2010 to help Florida and several other states hard hit by the foreclosure crisis. Florida's $1 billion share is administered by the Florida Housing Finance Corp., a state-run agency that is using the money to provide mortgage assistance for people who have lost their jobs, had sizable drops in income or are severely under water on their loans.

Spokesperson Cecka Rose Green said the agency has a variety of programs that have helped 23,000 homeowners so far, the fourth largest number among states receiving Hardest Hit funds.

"The percentage of homeowners who have had foreclosures subsequent to receiving Florida Hardest Hit Fund assistance is still relatively small compared to those who have not,'' she said. "Florida's programs are continuing to allow many of those who participate to sustain their homes.''

Much of the state's Hardest Hit money is being used in the so-called Unemployment Mortgage Assistance Program.

Designed for jobless or under-employed homeowners struggling with a first mortgage, the program provides up to $42,000 in assistance — as much as $18,000 to pay past-due amounts and up to $24,000 for 12 months of future mortgage payments.

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The goal is to give borrowers time to get back on their feet financially so they can resume making payments on their own. But of those hit with foreclosure notices since Jan. 1, the Times found several whose financial histories suggested they would be unable to keep their homes even with the federal help.

•Including Antoniou, who could not be reached for comment, four recipients of Hardest Hit assistance had lost previous homes to foreclosure. Among them: a Tampa man who claimed homestead exemptions on both his current house and a Miami condo that was repossessed by the bank.

•Another Tampa man was approved for $42,000 in federal mortgage assistance at the same time he owed the federal government $36,000 in delinquent income taxes.

•A St. Petersburg man was approved for $42,000 even though he had a second house that was in foreclosure, too.

While the amount of aid for which a borrower is approved is public record, the amount actually paid out per person is not. However, if all 85 Tampa Bay participants in the unemployment assistance program who are now in foreclosure received the full $42,000, taxpayers would have spent $3.57 million.

The homeowners themselves never see the money. Instead, it goes directly to the lender, which typically starts or resumes foreclosure proceedings as soon as the payments stop.

"It's a slush fund for the banks,'' said attorney Matthew Weidner, who represented many Hardest Hit Fund recipients after their 12 months of what he calls "free rent'' came to an end.

"We used taxpayer money to (help) the balance sheets of the banks with no accountability and consideration of whether it made sense to do that,'' Weidner said. "It's crazy.''

Among those who qualified for the unemployment program was Lane Wallace.

In 1989, he bought an aging, 665-square-foot mobile home in northwest St. Petersburg. During the boom years, he refinanced it for nearly $50,000 — thousands more than the property has ever been worth.

After Wallace defaulted on the mortgage, Wells Fargo began foreclosing in 2013. Late that year, though, state officials approved him for up to $42,000 in Hardest Hit funds to satisfy delinquencies and pay the mortgage for up to 12 months. But in March, the bank resumed foreclosure proceedings.

Wallace moved out and could not be located for comment. The run-down mobile home sits vacant, littered with trash, a dirty litter box and a few pieces of broken furniture.

A similar scenario played out in Largo after Michael Mazzola refinanced his 644-square-foot house for $80,000. In 2012, he was approved for up to $42,000 in Hardest Hit assistance but after the payments stopped Wells Fargo began foreclosing early this year.

Like Wallace, Mazzola moved on, leaving the house empty and in disrepair. He did not return calls for comment.

Weidner did not represent either man, but said they are typical of borrowers who got loans based on unrealistically high property values.

"Why were the banks not required to take off some of the principal?'' he wondered. "Was there a determination of reducing principal rather than putting $42,000 on a house that ultimately gets foreclosed?''

In response to such criticisms, the Florida Housing Finance Corp. launched a principal reduction program in September 2013 for homeowners who were under water on their mortgages but still current on their payments. It proved so popular that applications hit the 25,000 cap within a few days, prompting the agency to reopen the program in early 2014.

As of June, according to state figures provided to the Treasury Department, the loan balances of 5,313 Florida home­owners had been reduced by as much as $50,000. However, 12,264 applicants had been rejected and 4,279 were still waiting to hear.

The principal reduction program is still taking applicants as is the unemployment assistance program despite the growing number of recipients falling into foreclosure.

Florida Sen. Bill Nelson requested a federal investigation of Florida's programs in the wake of a 2013 Times story that revealed that some of the state's Hardest Hit funds had gone to felons and tax cheats while many honest, hardworking homeowners were rejected. The special inspector general for the Treasury Department's Troubled Asset Relief Program has been investigating but no report has been issued yet.

The inspector general is among those who have criticized the $7.6 billion Hardest Hit Fund program nationally for a lack of transparency, vague goals and the reluctance of banks to reduce loan balances so borrowers can afford their payments over the long term.

McCabe, the real estate consultant, notes that many of those who have received temporary Hardest Hit unemployment assistance are stuck with high-interest loans with huge balances that they were barely able to afford even while working.

"So unless the borrower is able to find employment that yields income at or above their previous jobs, it will be difficult if not impossible for them to continue making payments,'' McCabe said. "Making a few months of payments is kind of like throwing pocket change at a multi-billion dollar problem.''

Times Researchers Carolyn Edds, Caryn Baird and John Martin contributed to this report. Contact Susan Taylor Martin at smartin@tampabay.com or (727) 893-8642. Follow @susanskate.

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