Georgia risks passing up millions of dollars in funding to stop foreclosures

Mark Harris always wanted a house with a two-car garage and a fireplace. In 1996, the U.S. Army veteran and commercial truck driver finally got his wish when he left Cascade Heights and moved into a ranch-style home on Dunwick Drive in Avondale Estates.

“My home is my pride and joy,” Harris says. “It’s literally my symbol of success. It’s my security blanket. When you enter into homeownership you look at it as a long-term life-changing experience.”

Late last year, Harris lost his job as a delivery truck driver and started falling behind on his mortgage payments. While visiting the Georgia Department of Labor, he learned about a federally funded state program called HomeSafe Georgia that was created to help the unemployed and underemployed pay their mortgages and fend off foreclosure for up to 18 months while they look for work. When his lender started foreclosing on his house last May, he applied to HomeSafe. Five months later, he says, his application had not been approved. The lender moved ahead with the foreclosure.

“The requirements are crazy,” says Harris, who, despite fighting the mortgage company in court, was evicted last week, arrested trying to occupy his home, and, as CL went to press, was planning on staying at a homeless shelter for veterans. “Just like with any other government program, it sounds good until you apply for it and there’s all this red tape.”

HomeSafe, which launched in April 2011, has attempted to keep people sheltered during the toughest economic period the United States has seen since the Great Depression. But according to housing activists, it’s extremely restrictive. The federal government has set aside $339.3 million for Georgia’s program through 2017. At that time, any unused funds must be sent back to Washington, D.C. Judging from Georgia’s own reports, the state runs the risk of returning millions.

In 2011, the federal government allocated $7.6 billion to help people in 18 states and Washington, D.C., stem the tide of foreclosures. Georgia, which last year had the fifth highest foreclosure rate in the country, desperately needed the assistance. Known as the Hardest Hit Fund, the pot of cash was split up among states based on declines in home prices and unemployment rates.

Each state was given the freedom to craft its own program. The Georgia Department of Community Affairs (DCA) was tasked with doling out $339.3 million to thousands of people unable to pay their mortgages. The goal was to provide enough financial assistance to help 18,300 homeowners stay in their houses.

But Georgia and some other states selected for the program have experienced problems allocating the cash. Last April, Christy Romero, the special inspector general who monitors how the federal government manages programs aimed at easing the recession, released a report scolding the Treasury Department for “significant delays” in spending the money.

Two years after it was created, about $214 million — only 3 percent — of the Hardest Hit Fund’s total budget had been distributed to the 18 states and Washington, D.C.

Romero wagged a finger at Georgia’s program, which, as of last spring, had only allocated $23 million dollars to fewer than 1,000 people — far short of its goals. In an April 2012 AJC interview, Romero said the state was “sort of maintaining status quo and watching disappointing numbers come in quarter after quarter.”

There are many hoops to jump through to receive HomeSafe funds. Qualified applicants must be currently unemployed or underemployed. They cannot have voluntarily quit their jobs, receive Social Security, or sign up for disability benefits. If a homeowner wasn’t current on their mortgage before losing employment, or is currently six months or more behind, he or she is not eligible. If a foreclosure or bankruptcy process has begun, HomeSafe won’t help you.

There’s also an exhaustive list of financial requirements that includes having no tax liens, bankruptcy filings, or more than $5,000 in liquid assets. In addition, homeowners must be legal Georgia residents and their mortgage lender must participate in the program. Homeowners then need to submit an application complete with a hardship letter, financial worksheets, past work documents, and supporting tax records. The median length of an application approval is 164 days, more than five months.

HomeSafe’s critics contend that the strict eligibility criteria have prevented hundreds, perhaps even thousands, of people from avoiding foreclosure. The requirements, they argue, could be loosened to include such factors as major illnesses, disability, death of a spouse, and divorce. Kristen Tullos of Atlanta Legal Aid thinks the state program could also cast a wider net to include financial loan modification, refinancing, or expanding eligibility to include those who are more than six months behind on their mortgages.

More people could qualify and the federal dollars would actually be put to use rather than sit idle.

page
“It was designed to catch people at the peak of the foreclosure crisis,” Tullos says. “There’s no reason to wait to get the money out. It makes sense to get it out faster to help as many people as possible.”

Loganville homeowner Julie Costello is one of the people who could have benefited from these kinds of changes. Late last year, the Hepatitis C research clinic coordinator was diagnosed with breast cancer. She took time off work but ultimately was not hired back.

For the first time since she was 14, she says, she had no job. In the middle of chemotherapy and radiation treatments, payments on the three-bedroom home she shares with her daughter, Kaitlyn, went by the wayside. She felt depressed. Calls from bill collectors started. In the middle of her recovery, she’d look out the window and see men walking through her backyard, past the flowerbed she dug with her daughter, surveying the property before they put it on the market.

Thanks to an unexpected cash donation from the Georgia Transplant Foundation (her daughter is a liver transplant recipient) and the help of Atlanta Legal Aid, Costello was able to stay in her house. Her parents have since helped her stay up-to-date on her mortgage payments. But had she been eligible for HomeSafe, she says, a harrowing experience amid a cancer diagnosis could’ve been avoided.

“They didn’t think about people with medical issues,” Costello says. “It amazes me when you’re really going through a hardship. You can’t move, can’t do anything. You’d think HomeSafe would cover that.”

DCA Division Director Saralynn Stafford says she understands how additional concerns like Costello’s medical condition may make mortgage payments difficult and claims the DCA is “always looking at ways to help the greatest number of people.” She declined to comment on possible DCA policy changes, citing a specific focus on recession-related employment struggles. What would most help the program, she stresses, is greater awareness and simply encouraging more people to apply.

HomeSafe officials say the program has helped thousands of people and has seen increased payouts after making some much-needed tweaks, including partnerships with housing counseling agencies to assist applicants. So far, the DCA’s program has “committed” — but not actually handed out — more than $77 million in assistance to troubled homeowners who fell behind on mortgages during the recession.

But Atlanta Legal Aid, citing HomeSafe’s own quarterly reports to the Treasury, says Georgia’s program is not doing nearly enough. The latest reports show that the state has only distributed 9 percent of the allocated funds, or $31.7 million and has nearly $300 million left to distribute in the next four and a half years. Out of the 19 participating governments, Georgia ranks 17th in funding spent on assisting homeowners, 18th in percentage of applications approved, and 15th in how quickly applications are approved, according to an Atlanta Legal Aid study. Georgia has spent less than a quarter of its federal funds, putting the state significantly behind schedule, considering the program is more than halfway over.

But Stafford says that the program has allocated substantially more money despite criticisms, especially in recent months after “drastically increasing” outreach by visiting churches, attending neighborhood meetings, and hosting other events in hard-hit communities. The program will soon expand its outreach efforts to other metro regions in Georgia. Besides its marketing problems, she says it’s unfair to compare Georgia’s progress elsewhere since each state has a slightly different program.

Some states have adapted their programs, including Indiana and Rhode Island, which in January stopped accepting applications because it’d already committed all of its $79 million in funding. Advocates say these states have had more success doling out their Hardest Hit Funds, in part because they offer assistance to people who are not just unemployed or underemployed. By doing so, the program has helped residents receive funds during the recession when they needed help the most.

Romero has previously stated that participating states “can change their programs” if needed, something that can be accomplished via DCA proposals to the Treasury Department. “It’s not too late for the states to figure out how to use these funds,” she told The New York Times last June.  ”That’s the dynamic nature of the program, and that’s what needs to happen.”

Georgia lawmakers, predominantly Democrats, have urged President Barack Obama to take more direct action and the state to revamp its program. State Sen. Nan Orrock, D-Atlanta, introduced a resolution last March urging DCA, which is overseen by Gov. Nathan Deal, to be held accountable for HomeSafe’s “abominable” performance.

“GOP leadership failed to move the resolution forward,” she says. “We have sought meetings repeatedly with the DCA and they are clearly indicating that they want to avoid that conversation. The DCA has created stumbling blocks instead of stepping stones.”

page
At the national level, Congressman John Lewis, D-Atlanta, has sent President Obama two letters urging the federal government to take action to help more individuals gain access to the funds. In April, he and 28 other members of Congress asked Obama to issue an executive order requiring the Treasury Department to implement the suggested changes Romero offered for the Hardest Hit Funds program last April. While he hopes changes will come, the political climate in Washington isn’t likely to help his cause. Partisan gridlock doesn’t lend itself to progress. And a federal agency urging states to overhaul their programs could be met with accusations of overreaching by critics.

But it’s Deal who likely offers the best chance for reform. Deal spokesman Brian Robinson says the governor plans to meet with new DCA Commissioner Gretchen Corbin about ways to potentially expand eligibility requirements so that the money “remains in Georgia and helps deserving recipients.” If HomeSafe ultimately adopts laxer policies, it’ll have to keep an eye out for fraudulent claims.

“We have to balance the need to get the money out to homeowners with the need to maintain safeguards so that the program isn’t abused by unscrupulous applicants,” Robinson says.

Orrock doesn’t think fraud should hinder the DCA’s progress any longer and wants the department to find a way to get HomeSafe’s cash into troubled homeowners’ hands.

“The fraud is to take federal money and not help Georgians,” she says. “The DCA has no plausible explanation. One can only believe that this is deliberate when you look at other states’ performance.”

While it seems that the lack of progress could be an instance of a Republican-led state dragging its heels to make the most of a federal program from a Democratic president, the DCA denies partisan politics play a role in HomeSafe’s operations. But until changes are made, Harris, Costello, and other struggling homeowners facing non-employment hardships will continue to lack an option.

“Hopefully these new changes that they say are in the works will be substantial,” says Tullos. “And can help get money out to folks who can use it. At this rate I’d be surprised if they didn’t have to give money back to Treasury ... I think they know that something has to be done and I hope they do something drastic enough to expand the program. There is no shortage of people out there who could use the assistance.”

For more information on HomeSafe Georgia, visit www.homesafegeorgia.com or call 1-877-519-4443.