More than two years after $50 million of taxpayer money was earmarked for a loan modification program to help Florida homeowners, fewer than 100 borrowers have been enrolled and just $2.9 million spent.

The Modification Enabling Program, one of five plans that fall under Florida’s $1 billion Hardest Hit fund, was approved in March 2013 to cut homeowner mortgage balances and make payments more affordable.

Borrowers can receive up to $50,000 in the program, which through April enrolled 96 homeowners. Another 812 borrowers have been identified as potentially eligible.

The Florida Housing Finance Corp., which oversees how Hardest Hit money is spent, acknowledges the $50 million has been slow in reaching homeowners. It’s been six years since the worst of the foreclosure crisis swept across Florida and three years since the market made a turnaround.

But officials still have faith the plan is a viable way to keep struggling borrowers in their homes.

“While we understand everyone’s concern about the money, this was a new model, and we believe we are working through the challenges it presented,” said Cecka Green, a spokeswoman for Florida Housing. “Right now, we don’t feel the need to realign the money, but the beauty of Hardest Hit is if we get a year down the road and still don’t see a dent, we can change it.”

Florida has until the end of 2017 to spend its $1 billion. As of March 1, about 22,070 Florida borrowers have received Hardest Hit assistance and more than $573.5 million has been spent or committed.

The modification-enabling program is unique among the Hardest Hit plans, partnering Florida Housing with the New Jersey-based nonprofit National Community Capital.

The idea was for National Community Capital to buy defaulted mortgages through auctions held by the U.S. Department of Housing and Urban Development, or HUD. HUD began selling loans through its Distressed Asset Stabilization Program in 2012 as a way to reduce its losses and give homeowners a chance to have their mortgages modified by private entities not bound by the same restrictions as the federal government.

Florida’s Hardest Hit money would help modify eligible loans purchased by National Community Capital.

But few predicted that big-money hedge funds and Wall Street firms would get in on the auctions, outbidding nonprofits at nearly every turn.

The biggest purchasers of the defaulted loans have been Lone Star Funds, a global private equity firm, Bayview Asset Management, a Coral Gables-based investment management firm affiliated with The Blackstone Group, and Selene Residential, a Texas-based private loan servicer.

National Community Capital has won only one auction of Florida mortgages, a pool of Tampa-area loans in 2012. None of the loans modified so far by the Hardest Hit partnership with National Community Capital has been in South Florida.

“I am not surprised that the non-profit cannot keep up with the private companies,” said Alice Vickers, an attorney and director of the Florida Alliance for Consumer Protection, who advocated for the modification program when it was under consideration by Florida Housing. “I thought it was forward thinking that (Florida Housing) dedicated money to this purpose.”

Now, Vickers said it may be time to reconsider the program and “look into helping those on the waiting list to access the money in some other way.”

Scott Fergus, CEO of National Community Capital, said he too understands the concern about the limited money spent, but said he hopes people will be patient.

The process to get into the modification enabling program is longer than other Hardest Hit plans because homeowners are deeply evaluated for their ability to pay a modified amount and are put on a three-month trial plan.

After they are approved, Fergus said their likelihood of success is high.

“So the Hardest Hit funds are not going to be advanced into a loan that defaults,” Fergus said.

Also, National Community Capital is expanding its pool of eligible loans by working with the private firms winning the mortgage auctions. Some companies want to partner with the nonprofit and use it as the vehicle to modify the loan, Fergus said.

Although taxpayer dollars are being used to create a working loan for a for-profit firm, the private companies must forgive at least as much mortgage debt as what is put up in Hardest Hit money.

“We continue to be really optimistic,” Fergus said. “The borrowers we assist are ultimately financially stable and their loans are performing.”

HUD announced changes in April that it expects will allow more nonprofits to be successful at the auctions. Those include giving nonprofits a first look at vacant properties being sold, allowing winning bidders to re-sell notes to nonprofits, and offering a non-profit only auction.

Green said the board of the Florida Housing Finance Corp. will likely be updated on the progress of the modification enabling program before summer’s end. A previous update in April 2014 predicted there would be 142 loans modified within four months.

A year later, it still hasn’t hit that mark.

“Challenges came up that definitely affected those projections,” Green said.

Source: The Palm Beach Post via Florida Realtors