The economic crisis has affected a large number of people, leaving many unemployed and unable to pay back their mortgage. But the Pennsylvania Housing Finance Agency (PHFA) is showing that with the right assistance, most people can back on their feet and get rid of their liabilities.
The PHFA provides financial assistance to people facing economic hardships in the form of loans of up to $60,000. The mode of operation of the agency is simple. It extends loans to people after carefully going through their financial records. If it seems likely that the borrower will be able to repay the loan given sufficient time, then the agency agrees to provide help. However, if it appears that the borrower has been reckless and has other liabilities as well, the agency normally rejects the loan application.
A loan from the PHFA can be used to clear the arrears on your mortgage and to cover your monthly payments, which are made directly to the mortgage lender. The borrower should be able to resume full monthly payments within 3 years of assistance. This time period is generally enough for disciplined borrowers to get their finances in order and pay the PHFA back.
In most cases the agency charges an interest rate of 5.25%, but sometimes the rate varies depending on the financial situation of the applicants. The agency operates on funding from the state and from repayments by borrowers once they are out of the red.
Although similar programs have existed in the past, not all of them have been as successful. What could be working for the PHFA is the careful review that is carried out of each applicant’s financial background. Educated people with good job prospects in the near future are the ones who benefit from this program.
With 80% of the borrowers being able to pay off their debts, the PHFA is now considered so successful that attempts are being made to emulate its program. Officials from various other states also hope to set up similar agencies to help people who have been hit hard by the financial crisis.
So while the President and his administration look for ways to prevent foreclosures, agencies like the PHFA may be the solution for those who are down on their luck. There is a lesson for the banks too, who should consider each case on its merits before jumping into foreclosure proceedings.