Questions raised about Florida program to help homeowners behind on mortgages

Florida housing officials are expanding a program to help homeowners who stopped paying their mortgages and owe more than their homes are worth.

At the same time, however, more than 6,000 Floridians who are current on their payments have been denied assistance under a separate program that uses the same source of federal money.

Jack McCabe, a Deerfield Beach real estate consultant,' said "it's dead wrong'' to help delinquent borrowers at the expense of people still paying their mortgages.

"I've said for a long time that the folks that had been making their payments and held up their end of the bargain with the banks should be getting preference for any type of mortgage reduction program,'' McCabe said.

To do otherwise "is not right and I think they need to re-examine their approach,'' McCabe said of officials at the state-run Florida Housing Finance Corp.

At its April 25 meeting, the housing agency's board voted to expand the $50 million Modification Enabling Pilot Project that it quietly launched last June to help underwater homeowners behind on their mortgages. Cecka Rose-Green, Florida Housing's spokesperson, said the program is for people who originally could afford their mortgages but had an unexpected drop in income.

"These programs are designed to help two different types of homeowners,'' she said.

After the Tampa Bay Times began questioning how the federal money was being used, Florida Housing scheduled a news conference for 10 a.m. today to announce "important information'' about the program that helps homeowners who have stayed current on their mortgages. The news release indicated that officials may now expand that program, too.

Both programs, which pay down mortgage balances by up to $50,000, use money from the federal Hardest Hit Fund.

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The Modification Enabling Pilot Project, dubbed ReStart, for homeowners delinquent on their mortgage payments was created by a private organization called National Community Capital. Part of a large New Jersey nonprofit that develops affordable housing, National Community Capital says its "social mission'' is to prevent foreclosure and stabilize neighborhoods.

In 2012, it bought 249 Tampa Bay mortgages from the U.S. Department of Housing and Urban Development, which auctions off pools of delinquent, federally insured loans at prices far below face value.

National Community Capital then struck a deal with Florida's housing agency to use a mix of private and Hardest Hit money to reduce loan balances on its mortgages as well as on mortgages purchased by other investors at HUD auctions in 2012 and 2013.

"When more information becomes available,'' the housing agency said in March 2013, "we will make public announcements.''

No more announcements were made. And the program got off to a glacially slow start.

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The sole homeowners to benefit last year were Luis and Felicita Irizarry of Tampa. Far behind on their payments, they owed $241,553 on a small house worth less than $100,000. National Community Capital forgave part of the balance. The state then kicked in $50,000 from the Hardest Hit Fund, reducing the principal to $86,000. After the Irizarrys completed a three-month trial modification period in September, their monthly payments were permanently cut in half, to $720.

"It was a blessing,'' said Irizarry, a retired immigration officer whose wife had lost her job.

Eight more homeowners in Hillsborough, Pinellas and Polk counties got ReStart help in January and February. An additional 223 are on track to qualify.

However, the housing agency and National Community Capital realized they didn't have enough mortgages purchased from HUD in 2012 and 2013 to use up all of the federal money earmarked for the ReStart program.

"Even if all of these loans successfully modify, there will still be a substantial amount of the $50 million allocation remaining,'' agency officials said.

As a result, board members agreed that homeowners with mortgages bought at HUD auctions in 2014 and 2015 would also be eligible for principal reductions.

Instead of expanding a program that benefits investors and delinquent borrowers, Terence Fernald of Spring wonders why the agency didn't transfer some of the $50 million to a program that helps homeowners still paying their mortgages?

Called Hardest Hit Fund Principal Reduction, that program drew 25,000 applicants within a few days of being announced in September. So far, 2,230 homeowners have had their mortgages paid down by up to $50,000 but at least 6,123 more including Fernald have been rejected.

"It's amazing that if you use your 401(k) and borrow money and do everything to stay on top, they don't have any help for you,'' Fernald says. "If you go under, they help you.''

Susan Taylor Martin can be contacted at susan@tampbay.com.