Florida Sen. Bill Nelson calls for investigation of mortgage aid program

Sen. Bill Nelson is calling for a federal investigation of Florida's Hardest Hit Fund, a $1 billion mortgage assistance program that has denied aid to thousands of desperate homeowners while helping felons, tax scofflaws and people chronically in debt.

Nelson's request was prompted by a Tampa Bay Times investigation that uncovered dozens of homeowners with questionable backgrounds getting aid.

It also comes as state officials are moving forward with a plan that could change how some of the money is used. Starting in the Tampa Bay area, they propose spending $50 million in Hardest Hit Fund money to reduce loan principals, a boon to homeowners who owe more than their property is worth.

In a letter accusing state officials of "mismanagement" and "inaction," Nelson urged an investigation by the special inspector general of the federal Troubled Assets Relief Program, commonly known as TARP.

The office should "thoroughly look into" Florida's program as part of its broader, ongoing audit of the Hardest Hit Fund, Nelson wrote. Created in 2010, the fund provides $7.6 billion to help Florida and 18 other states hard hit by foreclosures.

"More than three years have passed since Congress created this program and only about 16 percent of the money available to Floridans has actually reached mortgage-troubled homeowners," wrote Nelson, a third-term Democrat and Florida's senior senator.

The state's program has been among the slowest and stingiest in the nation. As of Dec. 31, it had helped 7,314 homeowners — fewer than in Michigan, Ohio and North Carolina, states with much smaller populations.

Earlier this month, a Times review found:

• The office of Gov. Rick Scott — a critic of federal stimulus programs — restricted efforts to publicize the Hardest Hit program and was instrumental in reducing aid when it went statewide in 2011.

• The vast majority of Florida's 557,000 condo owners were ineligible for help for more than a year because of an arbitrary policy that was later reversed.

• At least 15 people in Tampa Bay alone got assistance despite felony records for fraud, possession of child pornography and other serious offenses. Dozens more received help despite previous foreclosures, IRS liens and bankruptcies.

In a statement Tuesday, the head of Florida Housing Finance Corp., the public agency that runs the Hardest Hit program, said state and federal audits have not found aid going to ineligible applicants.

"We are working tirelessly to put this federal assistance into the hands of the homeowners who qualify for it, and are confident the funding will be properly expended by the Dec. 31, 2017, deadline,'' said executive director Stephen Auger.

Florida currently uses the money only for loan payments for homeowners who lose their jobs or take pay cuts.

However, the housing agency is working with a nonprofit New Jersey organization, National Community Capital, on a plan to reduce loan principals on at least 1,500 Florida mortgages, including hundreds in the Tampa Bay area.

The plan builds on a new federal program that lets investors buy delinquent, federally insured mortgages at prices generally less than the principal owed. Foreclosure is then delayed at least six months while the investor and the home­owner work to find an alternative.

In December, National Community Capital bought 249 delinquent Tampa Bay loans. Under the plan, Hardest Hit funds would go to borrowers in the form of a second mortgage and would reduce the principal to market value, creating an incentive to continue making payments.

The Treasury Department still must approve the plan, which calls for forgiving the second mortgage, up to $50,000, if the homeowner meets all conditions of the program.

Only first mortgages insured by the Federal Housing Administration would qualify, limiting the number of homeowners who would be eligible.

Susan Taylor Martin can be reached at susan@tampabay.com.