Mortgage Loans That Turn Into Grants

It's no secret that Bedford-Stuyvesant was one of the hardest-hit neighborhoods of the most recent mortgage crisis.

Four years after the crash, the federal government remains under enormous pressure to help stem the wave of foreclosures that continue to sweep across the nation.

Its signature program, H.A.M.P (Home Affordable Modification Program), has helped more than 600,000 homeowners modify their loans. Still, millions more remain at risk.

Well, more help is on the way. A new program of the Department of Housing and Urban Development called the Emergency Homeowner's Loan Program will extend to eligible homeowners an interest-free loan up to $50,000 that can be used toward monthly payments or catching up with past due payments.

According to AnnaMaria Andriotis of SmartMoney, "The program is making loans with far better terms than anything on offer at a local bank."

The loans are interest-free. Payments go directly to the lender for a portion of the borrower's monthly mortgage, including missed payments or past due charges. And when the assistance period -- which runs for up to two years -- ends, 20 percent of the loan is forgiven with each passing year.

In other words, for qualified borrowers who stay in their home for at least five years after the assistance period and who don't fall behind on their mortgage again, this money doesn't have to be paid back.

Yep, you read right: The loan effectively turns into a grant. There are various qualifications that have to be met. Most importantly: 1. The loan has to made on a home that is your primary residence. 2. You are at least three months delinquent on your payments. 3. You have suffered a significant reduction in income because of involuntary employment, involuntary underemployment and/or medical emergency. 4. You have a mortgage cost burden, meaning that under your current, reduced income, the your monthly mortgage payment is greater than 31 percent of your monthly income.

Homeowners may receive EHLP assistance with monthly mortgage payments for a maximum of two years, or up to a maximum loan amount of $50,000, whichever occurs first.

NeighborWoks America is HUD's partner in the program. Their site says the pre-application process ends on July 22, 2011. Approximately 30,000 applicants will be given the loan.

With over four million homes behind in their payments, the help is just a drop in the bucket.

Let's hope it's your bucket that receives the drop.