What is the Washington State Homeowner Assistance Fund?
The Washington State Homeowner Assistance Fund is part of the federal government’s American Rescue Plan Act of 2021. The portion of the Act that outlines the Homeowner Assistance Fund can be viewed here.
The Act has set aside $9.9 billion dollars to help mitigate financial hardships caused by the pandemic. Each state will be given funds based on a formula that includes the number of unemployed individuals, mortgages in default, and mortgages in foreclosure.
Washington State is scheduled to receive $173 million.
What is the purpose of the Homeowner Assistance Fund?
The purpose of the Homeowner Assistance Fund is “to mitigate financial hardships associated with the coronavirus pandemic” by preventing “homeowner mortgage delinquencies, defaults, foreclosures, loss of utilities or home energy services.”
Per the Act, funds can only applied towards the following approved categories:
- Mortgage payment assistance, and other financial assistance to allow a homeowner to reinstate a mortgage or to pay other housing related costs related to a period of forbearance, delinquency or default.
- Principal reduction
- Interest rate reductions
- Payment assistance for utilities, including electric, gas, home energy, water, internet, homeowner’s insurance, HOA dues
This is a pretty comprehensive list, as it now includes previously unsupported areas like HOA and Condo delinquent dues, internet services, and homeowner’s insurance.
Who qualifies for the Washington State Homeowner Assistance Fund?
The Washington State Housing Finance Commission is overseeing the distribution of funds. They have yet to release the exact criteria for eligibility.
What we currently know is that per the regulations, at least 60% of the funds are to be targeted to homeowners with incomes that are less than the median income of their area, or less than the median income of the United States. The remaining funds are to be prioritized towards socially disadvantaged individuals.
The definition of socially disadvantaged individuals in the Act is “…those who have been subjected to racial or ethnic prejudice or cultural bias because of their identity as a member of a group without regard to their individual qualities.”
What are the income requirements to qualify for HAF?
In Washington State for 2022, per the Washington State Department of Health and Social Services (DSHS), the median income for one individual is $4,687/mo or $56,244 per year. Therefore, if you are a one-person household and your annual income is $56,244 you would pass the financial requirements. Larger households should consult the chart below.
The HAF program is limited to loans that have a principal balance at or below the FHFA’s conforming loan limits for Fannie Mae and Freddie Mac. This means that if your loan had a principal balance below $548,250 in 2021 it will qualify for assistance.
In addition, the program applies to “homeowner households” – meaning, the home requiring help will likely need to be your primary residence. It has not been confirmed as of yet, but it is not likely that vacant properties or rental properties will be covered under this act.
How do I request the funds?
The Washington State Housing Finance Commission is overseeing the program and the distribution of funds. They will be releasing details on their website in the spring of 2022.
They are recommending that you call the Washington Homeownership Resource Center (WHRC) at 877-894-4663 to inquire about the program.
What if I don’t qualify to get help from the HAF program?
It is possible that many homeowners will not qualify for HAF funds. If you don’t qualify for funding under this program, there are still many loss mitigation options available to you to help resolve the mortgage default issue.
- There are loss mitigation options that can help you keep your home without having to pay back all your missed payments at once
- There are also options to help you walk away from your home without experiencing foreclosure.
Your specific investor and your mortgage lender have their own loss mitigation programs designed to help you resolve the default issue and keep your home.
States like Washington have other programs like the Foreclosure Fairness Act that provides for foreclosure mediation that can stop foreclosure and provide alternative solutions.
Below is a list of options you can go through right now without having to wait on the HAF program to get implemented:
- Loan Modification: A loan modification is a new loan with new terms that allows you to resume mortgage payments without having to pay everything you owe all at once. Usually, your missed mortgage payments get added to your total principal balance and become due at the maturity date of the loan. It is common for loan modifications to offer reductions in interest rates, extended maturity dates, and sometimes – they lower the monthly mortgage payments.
- Repayment Plan: A repayment plan is an agreement that allows you to resume your regular mortgage payment and pay an extra amount on top of your mortgage payment until you’ve paid back all your missed payments. Once you have paid everything back, you continue making your regular monthly mortgage payment.
- Forbearance: A forbearance gives you a temporary break in having to pay your mortgage. Once approved for a forbearance, you are allowed to stop payments for the approved months without the lender taking foreclosure action against you.
- COVID-19 Deferral Agreement: For those of you who were placed on a COVID-19 Forbearance plan (and have Fannie Mae or Freddie Mac as your investor), you may be able to receive a deferral agreement which takes the amount of payments you missed during your forbearance and defers the amount owed to the maturity date of your loan so you can just resume your regular payment.
- Partial Claim COVID Transition Option: For those of you who were placed on a COVID-19 Forbearance plan (and have FHA as your investor), you may be able to receive a partial claim agreement which takes the amount of payments you missed during your forbearance and defers the amount owed to the maturity date of your loan so you can just resume your regular payment.
- Short Sale: A short sale allows you to sell an underwater property for less than what is owed on the mortgage. Your mortgage lender approves the sale and then typically waives the deficiency balance (the remaining amount owed) so you can sell your home and move on without owing the remaining balance.
- Deed in Lieu of Foreclosure: A deed in lieu of foreclosure is an agreement between yourself and your mortgage lender where you sign a document giving the house back to the bank in exchange for the bank agreeing not to foreclose on you.
Don’t wait or rely on HAF funding if you’re having mortgage problems now
The state programs won’t be in place until Spring of 2022 and most government programs take a long time to be fully implemented.
Since we don’t exactly know who will be eligible and how funds will be allocated, don’t rely on these funds if you’re missing mortgage payments now.
You don’t want to be in a situation where you are up against a stressful foreclosure timeline when you could have fixed the issue ASAP.
If you are a Washington state homeowner who would like help exploring your mortgage relief options, call me for a free consultation at (425) 654-1674.
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