Earlier this year, the attorneys general of 49 states reached a $25 billion settlement with the nation’s five biggest lenders to end mortgage servicing and foreclosure abuses. Pennsylvania’s share of the settlement totals $266 million, with $69 million specifically allocated for direct payments to our state for local foreclosure initiatives.
After the announcement of the settlement, my fellow Democratic Senators and I sent a letter to Pennsylvania Attorney General Linda Kelly asking her to earmark the $69 million to fund a state program to prevent foreclosures, known as the Homeowners Emergency Mortgage Assistance Program (HEMAP). During this time, I also wrote in the February 28 edition of my News & Views about the beneficial and successful history HEMAP has had in Pennsylvania and why it is necessary to bring this program back.
In the 2011-12 budget, HEMAP’s funding was cut by roughly 81 percent, from about $10.5 million to $2 million. At that point, the Pennsylvania Housing Finance Agency (PHFA), which administers HEMAP, determined that the $2 million appropriation was insufficient to continue the program. HEMAP was shut down in July 2011 and has been unable to service new clients since September 2011.
I am thrilled to announce that our efforts have been successful. On June 22, Senate Bill 1433 (SB1433) was signed into law (Act 70), once again providing a multi-year funding stream for HEMAP from the settlement money. I am pleased to have been not only a co sponsor to the now Act 70, but also to have aided the swift passage of this legislation.
Act 70 creates a trust fund with the settlement dollars for the purposes of HEMAP to be administered over five years and requires no tax dollars. In particular, 90 percent of the fund’s money is set for HEMAP, with the remaining ten percent split evenly between the Attorney General for housing consumer protection programs and the other five percent for legal assistance related to housing issues. Pennsylvania will receive an initial installment of $69 million as well as an immediate supplemental appropriation of $6 million for HEMAP to address a backlog.
After the initial year, the legislation stipulates no more than $12 million will be distributed from the fund on a yearly basis for the targeted services. PHFA has said its hopes to resume taking HEMAP applications as early as July.
In my experience as a Realtor, and as a State Senator, I understand what the housing crisis has done to so many families across the state. This settlement money earmarked for HEMAP is not a bailout, rather it provides loans to those Pennsylvanians who face foreclosure because of reasons like an unexpected medical emergency or being laid off from their job. Furthermore, more than 85 percent of families who have received HEMAP funding have been successful in repaying their loans. The evidence is clear that HEMAP has proven to be good for the community and a necessary part of our economic recovery.
Senator Wayne D. Fontana
42nd Senatorial District