UnemployedKyle and Desiree Bates face a financial double whammy. Kyle, 39, is on long-term disability to recover from brain surgery that resulted from hydrocephalus, or water on the brain. Desiree is struggling to find a job, and the income from her small cake-baking business is not nearly enough the couple and their three children.

But their $1,100 monthly mortgage bill keeps coming, along with medical expenses. With help from extended family, they have fended off foreclosure on their Fort Worth, Tex., home, and are down from four months to two months on late payments.

Last Tuesday, they reached out for a lifeline. Their mortgage lender encouraged them to work with the Business and Community Lenders of Texas to complete an application for an interest-free loan of up to $50,000, made available though a new program, the Emergency Homeowners' Loan Program or EHLP. The $1 billion program is available to distressed homeowners in 32 states and is the latest government initiative from the Department of Housing and Urban Development and NeighborWorks. It is the first program to specifically target those who are unemployed or who have had medical emergencies.

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The high unemployment rate, which edged upward to 9.2% in June and is now at its highest level since last December, continues to deeply affect where and how millions of Americans live. To create more relief for unemployed homeowners, the Obama administration announced on Thursday that the Federal Housing Administration will require mortgage servicers to extend forbearance for another year to borrowers with FHA-insured loans. Servicers who are part of Making Home Affordable will also be required to extend the forbearance for another year for unemployed homeowners.

But it may be too little, too late. Families represent a much larger share of the homeless in the shelter system than ever before, according to HUD's 2010 Annual Homeless Assessment Report to Congress, which was released in June. Between 2007 and 2010, the number of homeless persons in families increased by 20%. The majority of homeless families consist of a single mother with young children.

'A Vicious Cycle'

Take the example of San Diego, where the local unemployment rate is slightly above the national average. It's not getting better there, either: More than 1,400 teachers and other educational staff had their last day of work this month, following deep public budget cuts.
Juan Del Rio, program director at Neighborhood House Association in San Diego, says the need for help for unemployed homeowners is not abating. "It's a vicious cycle," he says. "It's not overwhelming yet, but it's getting there."

In addition to working directly with a lender, housing organizations like Del Rio's are typically the first line of defense for unemployed homeowners.

"If you work with a nonprofit, you are more likely to get a mortgage modification," says Douglas Robinson, a spokesperson for NeighborWorks.

Del Rio advises distressed homeowners to immediately ask their lender for a loan modification or forbearance, or apply for assistance when they know unemployment is imminent. Modifications can take months: "By doing it early, the odds are in your favor versus waiting and passing the threshold" for getting aid from a government program.

HUD launched EHLP on June 20, and homeowners have until July 22 to apply for the the program. The government agency hopes to provide funds for up to 30,000 people. Homeowners in states not covered by EHLP or similar programs -- and that includes California -- can apply for assistance through the Hardest Hit Fund, which has allocated $7 billion to states for housing-related aid.

Del Rio says doubling up with family and roommates, or creating a rental situation in part of the home can also add another source of income or defray costs.

"There is only so much you can do," acknowledges Del Rio. "People here have been unemployed for six months to a year." Transitioning out of the home with a short sale or even bankruptcy are scenarios that can prevent foreclosure. While housing organizations can surface a number of alternatives to try and sustain payments, the goal is prevent foreclosure and "try to keep credit as much intact as much as possible."

Renters Face Swift Consequences

While the thrust of government efforts has been to help out-of-work homeowners, renters can be in an even more precarious position when they lose their jobs. The consequences are swift. Landlords don't typically negotiate with tenants, and even one month of delinquency can start the eviction process. Compounding the issue is that renters generally tend to be in lower income brackets and have slender safety nets.
"A great concern is the lack of coordinated response, because renters are a huge community and they have a limited amount of time," says Geraldine Doetzer, an attorney with the National Law Center on Homelessness & Poverty. "It points to the problem of a sheer lack of affordable rental housing. That has been a reality for many decades and is coming into sharp focus now."

RentAssistance.us is grassroots resource for people who need help. Zack Preble founded it on a volunteer basis several years ago to consolidate information from government, nonprofit and private agencies that provide rental help. Traffic has continued to grow steadily, with an average of more than 100,000 unique views a month.

"The amount of emails from people who need help are overwhelming. For every one success I hear about, there are 20 to 30 emails [from people] who are about to lose their home and be on the street," he says. Most users, he says, come from California, followed by Florida, Texas and Illinois.

Trying the Best They Can

The Bates family will know by mid-August if their loan request has been approved; the government aid program is scheduled to initiate payments with lenders in September. "We keep the lights turned off and conserve electricity," Desiree says about the family's efforts to cost cuts. Meanwhile, she's baking cakes as fast as she can to makes ends meet.

"Everybody is really into piña colada [cake]," she says. With high spirits belying their grim financial situation, Kyle says, "It tastes awesome."

If you are unemployed and at risk of losing your home, visit HUD website for housing assistance and local resources. If you are at risk for homelessness, call 211 for information and referral services, or contact the United Way or the Salvation Army for additional help and information.

Catherine New is a staff writer with DailyFinance.com. You can reach her here.




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