9:56 AM Tue, Nov 09, 2010

By Paul Edward Parker

The state has begun distributing $80 million in federal money to help Rhode Islanders who are in danger of losing their homes to foreclosure.

Rhode Island Housing, the state agency that deals with mortgage and housing issues, oversees the program, which became available to Providence residents Nov. 1 and will be available statewide Dec. 1.

The program will help homeowners who have suffered a documented financial hardship, such as a loss of income, including unemployment, disability or death of a key wage-earner; unforeseen medical expenses, or costly home repairs as a result of the spring floods.

Homeowners cannot apply directly to Rhode Island Housing. They must consult with their mortgage lender, if it has a loan servicing office in Rhode Island, or a counselor certified to process applications for the Hardest Hit Fund — Rhode Island, as the program is called. A list of counselors is available on the program’s website, www.hhfri.org.

The $80 million program will help homeowners in a variety of ways, including helping to:

— obtain a mortgage modification from lenders.

— make mortgage payments while unemployed.

— make an immediate payment to save a home, such as unpaid property taxes.

— assist homeowners, who are in a severe financial crisis, to relocate.

The program has several restrictions, including:

— Only one- to four-family houses and condominiums are eligible, and the owner must live in the house and not own any other real estate.

— Income is limited to $87,800 for one- and two-person households and $102,400 for larger households.

— Monthly mortgage payments, including taxes and insurance, must be greater than 31 percent of gross income for most aspects of the program.

— Homeowners have used up government and bank assistance programs and have no financial resources of their own. Saving accounts of up to $5,000 and 401k and IRAs are exempt.

President Obama unveiled the Hardest Hit Fund in February, when he announced $1.5 billion for five states that had seen the steepest declines in housing values. The money is being redirected from the $700-billion Wall Street bailout. Those states were Nevada, California, Florida, Arizona and Michigan.

When that money was announced, Rhode Island Sen. Jack Reed, along with two senators from Ohio, complained to the administration that their states needed help, too. About a month later, a second round of money was announced, including Rhode Island.