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Three hard-hit states have proposed using federal funds to pay down loan balances for distressed borrowers and to subsidize mortgage payments for the unemployed.
The proposals come in response to a foreclosure-prevention effort by the Obama administration, which set aside $1.5 billion for the five states hardest hit by the housing crisis: California, Florida, Michigan, Arizona and Nevada. The funds are being allocated as part of the Troubled Asset Relief Program, or TARP. Proposals are now being reviewed by the Treasury Department and will be finalized next month.
While the funding is modest relative to the magnitude of crisis, and will make only a small dent in the foreclosure problem, the administration has touted the “hardest hit” program as a laboratory for states to experiment with new ways to alleviate the housing crisis.
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