Free Money For Struggling Home Owners

There is a new federal program offering financial aid to struggling homeowners  and the funds don't require repayment. The federal government is offering free money to homeowners behind in their mortgage payments to help them bring their loans current.

Called the Emergency Homeowners Loan Program (EHLP), it's the latest in an effort to slow down the flood of foreclosures and attempt a recovery of the deteriorating housing market. The program offers interest-free loans of up to $50,000 to applicants meeting certain requirements and runs for up to 2 years. To be eligible, homeowners must have lost their income and be at the risk of foreclosure due to an involuntary job loss, underemployment, medical or other economic condition.

Here's how the program works: Payments go directly to the lender for a portion of the borrower's monthly mortgage, including any missed payments or past due charges. When the assistance period ends, 20% of the loan is forgiven with each passing year. For qualified borrowers who stay in their home for at least five years after the assistance period ends, and who don't fall behind on their mortgage, the money doesn't have to be repaid.

However, there are drawbacks. If borrowers sell their home before the entire loan is forgiven, they could be caught in a difficult position and liable for the remaining amount. Also, should they fall behind on their mortgage payments again, they would need to repay the remaining balance of the loan when they sell or refinance their home.

Whether the program will be sifficient to boost the ailing housing market is yet to be seen. It is estimated that approximately 4.5 million borrowers, roughly 8% of all mortgages, are behind on their mortgages by at least 90 days or are in foreclosure. Loss of income is deemed the primary reason why borrowers are in danger of losing their homes. 

Applications will be accepted through July 22 and available online through NeighborWorks America.