State readies more aid for ‘underwater’ homeowners

Florida homeowners current on their mortgages are expected to get a second chance to slice as much as $50,000 off the amount they owe.

Key leaders of a state agency that is distributing the money said this week they want to open a second roundof funding to reduce the amount Floridians owe on homes that are financially “underwater” — those worth less than their mortgage balance.

The first round was so popular that the state stoppedtaking applications Oct. 2, less than a week after the program started. The housing group’s computer system initially crashed under the volume of an application per minute on the first day. More than 25,000 Florida homeowners applied before the state stopped the process.

“The program was exactly whatneededtohappen. Therehas been a great response,” said Len Tylka, chairman of Florida Housing Finance Corp., the agency charged with distributing federal Hardest Hit money throughout the state. “I think the goal at

this point in time is to get the funds spent.”

The board is likely to discuss the prospects of giving Floridians a second chance at the mortgage-reduction money during a meeting in Tallahassee onFriday, Tylka said. But any final decisions on how to distribute the money are likely months away.

Local housing agencies are wading through the initial applications to see who qualifies, a process that cannot happen quickly enough for financially stretched homeowners. Among them is Orlando resident Jim Reese, a 72-year-old widower who applied for the program.

“I can make one more payment, and then it’s going to bring my savings account down to zero,” he said.

Reese’s home, valued at $50,000, is saddled with a $172,000 mortgage.

Although the state’s housing market has been recovering for more than a year, Florida Housing Finance rolled out the first round of the mortgage-cut program to help Floridians who are current on their loans by reducing their monthly payments.

The Obama administration approved $7.6 billion of federal Hardest Hit funds in 2010 to help 18 states devastated by the real- estate downturn. Florida’s billiondollar share of the money trickled out so slowly — mostly helping unemployed homeowners who were delinquent on their mortgages — that the U.S. government launched an investigation into the spending in March.

Six months later, Florida Housing Finance rolled out the principal- reduction program, which committed more than a third of the state’s Hardest Hit money in one week.

About $192 million of Hardest Hit funds remain to be spent on either a new program or an extension of an existing one. In its first round of principal-reduction spending, the state hopedto grant an average of $35,000 to about 10,000 Floridians with underwater mortgages.

Based on that spending, a second roundwould benefit about 5,500 households across the state — still a fraction of the million-plus Florida households stuck with mortgages higher than their homes’ values.

Florida Housing Finance board member Barney Smith, who is expected to succeed Tylka as chairman of the group, said this week he would like to see the principal-reduction program extended and perhaps target homeowners in parts of the state that have struggled to recover from the downturn, which began in 2007.

In Central Florida, the four-county Orlando area has exceeded statewide home-price gains in recent years, but prices in some communities, such as Pine Hills, have continued to languish.

The first round took applications from homeowners on a first-come, firstserved basis. They could have mortgages on which they owed as much as $ 350,000 and incomes higher than the area’s median. Ultimately, if they are approved, their mortgages will be restructured to reduce monthly payments.

One group largely shut out of the last round of funding was homeowners who do not have computers.

In Orlando, 79-year-old homeowner Annie Mayhue does not own a computer and said she hopes the state will allow applications by mail or telephone.

With mortgage payments of $355 and a monthly income of about $1,000, Mayhue said, a reduction in her mortgage payments could make a big difference in her life.