Program offers up to 50k to underwater homeowners

State officials on Wednesday announced a $110 million program aimed at helping thousands of homeowners struggling to stay in their homes.

The program – funded with federal dollars – provides up to $50,000 to people who are “underwater,” that is, who owe more on their mortgages than their homes are currently worth, officials told The Atlanta Journal-Constitution.

Checks will be written for up to 3,000 homeowners, said Carmen Chubb, deputy commissioner of housing for the Department of Community Affairs.

“The program is officially for three weeks, but we will accept applications as long as we have funds available,” she said.

The money – officially a loan — will go to reducing principal, but the state will forgive 20 percent of that loan each year, she said.

“The goal is to help people stay in their homes and restore their financial footing, but if the property sells for a profit within the first five years, there is a formula that requires partial loan repayment.”

The state started accepting preliminary applications online.

The number of Georgians underwater ballooned during the housing crisis and, though down since then, remains at about 150,000. The state, one of the hardest-hit by the housing crash, ranks fourth in the nation for homeowners who have negative equity, according to the most recent data from CoreLogic.

CoreLogic says that nearly 9 percent of homes with mortgages are still underwater. Most are located in 20 ZIP codes within metro Atlanta, according to Chubb.

Being underwater typically prevents homeowners from taking money out of the home through refinancing. Moreover, it is a large obstacle to selling the home, since the seller would have to bring cash to the closing to pay off the loan.

The average price of Atlanta homes bottomed out in mid-2012 and has risen dramatically since. But in many areas, the recovery has lagged.

So long as the neighboring market is improving, there is hope of catching up. But when home values are not rebounding, a homeowner can be virtually trapped in a house, responsible for taxes and repairs while making a monthly payment like a renter with little hope of a return on his or her investment.

Some non-profit groups are also working on the problem. For example, the Atlanta Neighborhood Development Partnership has been given a $1 million grant to acquire and fix up homes for low-income buyers.

Some underwater homeowners simply walked away during the recession. That tainted their credit, while dumping underpriced homes into the for-sale pool. The result was that the underwater epidemic was not only painful for homeowners, it also damaged and distorted the housing market.

“We want to get people to a loan-to-value that is reasonable for them,” Chubb said.

Support real journalism. Support local journalism. Subscribe to The Atlanta Journal-Constitution today. See offers.

Your subscription to the Atlanta Journal-Constitution funds in-depth reporting and investigations that keep you informed. Thank you for supporting real journalism.