The Pew Center on the States predicts that one in 38 Missouri homeowners will face foreclosure as a result of subprime loans made in 2005 and 2006, and 40 percent of homeowners will likely see their property values decrease as a result.
In the St. Louis area alone there could be as many as 17,000 foreclosures in 2008 – hitting older neighborhoods in north St. Louis County the hardest. This is a disturbing prospect that could have a devastating effect on families, neighborhoods and the economic well being of the entire state.
Decisive action is needed to address this situation to keep families in their homes, keep neighborhoods strong and keep the tax base of our local communities healthy. Unfortunately, the State of Missouri has done little to help homeowners facing foreclosure.
Defaulting on the Dream: States Respond to America’s Foreclosure Crisis, the Pew Center’s report issued this past April, says Missouri “has done little to directly assist families at risk of defaulting on their home loans.”
Around 5 percent of Missouri borrowers are past due on their payments with most of these borrowers only 30 days late. Foreclosures in Missouri are projected to cause a $1.8 billion loss in our state and local tax base, and will affect the loans and property values of 40 percent of homeowners. State government can and should help these families stay in their homes and help our economy at the same time.
Our state should empower the Missouri Housing Development Commission (MHDC) and local counseling agencies to expand efforts to educate borrowers at-risk of defaulting on their loans. Many borrowers do not know where to turn when they face financial difficulties, even though local counseling agencies have programs in place to help them. The state needs to increase marketing efforts to notify borrowers of financial and legal assistance available, and mortgage lenders and servicers should be required to notify borrowers of their options much earlier in the foreclosure process.
For those qualified Missouri borrowers who need financial help to stay in their homes, the state should establish the Missouri Mortgage Assistance Program (MoMAP) at MHDC. MoMAP is based on the Pennsylvania Homeowners’ Emergency Mortgage Assistance Program established in 1983 and replicated in nine other states. MoMAP will help homeowners catch up on mortgage payments, while allowing them to pursue alternate employment, educational development or job training in the roughest of times.
If a qualifying Missouri homeowner were in jeopardy of having their mortgage foreclosed, MoMAP would originate a loan to help bring the delinquent payments current (non-continuing loans) or subsidize subsequent monthly mortgage payments (continuing loans) to their lender. These loans will be available for up to 24 months from the date of delinquency, or to a predetermined maximum amount, whichever comes first. MoMAP loan recipients will be required to pay up to a certain percentage of their monthly income, as determined by MoMAP, towards their total expense.
If a Missourian qualifies for a MoMAP loan, the homeowner would send a reduced monthly payment to MoMAP. MoMAP combines the homeowner’s contribution with MoMAP funds and forwards the total monthly mortgage payment to the lender on the homeowner’s behalf.
The homeowner will repay MoMAP based on the type of loan received. As a MoMAP continuing loan recipient, the homeowner will begin repayment following termination of the continuing loan disbursements. Homeowners who received a non-continuing loan will begin repayment immediately following the loan closing.
MHDC has a long track record of being one of the strongest state housing finance agencies in the country and should be asked to use its skills and relationships with local counseling organizations to implement this important program.
Please join me in urging our state legislature, MHDC and Missouri’s next governor to enact this program in 2009.
Zweifel is a candidate for Missouri state treasurer.
