Help with troubled mortgage is offered

Money available for those with nontraditional home loans

States can allocate some of the $10 billion in federal funding for struggling homeowners to help people who bought their residences with nontraditional home loans, according to Treasury Department officials.

Guidance issued Monday for the new Homeowners Assistance Fund allows states to provide financial aid to qualified residents who face foreclosure on a loan for a mobile home or a home acquired through a contract for deed — a loan financed by the seller of the property. Some elderly residents who have taken out a reverse mortgage on their homes a deal in which a borrower can get cash for the equity in their house may also qualify for the emergency-assistance money.

The Treasury Department’s decision to extend the program’s support to those who do not have traditional mortgages came after prodding by advocates and some state governments. A handful of states, including Texas and New York, drew up preliminary plans that would allow them to allocate some of the money in the Homeowners Assistance Fund to those with mobile homes or houses acquired through contracts for deed, which are sometimes called land contracts.

Such homeowners are among the most vulnerable because they can be easily foreclosed on or evicted after missing just a few payments. And these borrowers, who typically have poor credit ratings, tend to pay higher-than-normal interest rates on the loans they take out to acquire their residences.

The $10 billion allocated to the Homeowners Assistance Fund was included in the American Rescue Plan, the $1.9 trillion measure enacted by Congress and the Biden administration to help keep Americans “experiencing hardships associated with the pandemic” in their homes. The money is being allocated to states, Native American tribes and U.S. territories.

The Homeowners Assistance Fund is separate from the $47 billion that the federal government is giving to states to provide rental assistance to tenants facing eviction that was also included in the American Rescue Plan.