In 2011, tens of thousands of struggling Illinois homeowners may receive the financial aid they need to hold onto their houses under a program being prepared by the Illinois Housing Development Authority (IHDA). The agency has been allocated $445.6 million of U.S. Treasury TARP funds to help unemployed and under-employed homeowners stay out of foreclosure and is now working on the details of how to get that money to homeowners.

In its present form, which IHDA proposed to the U.S. Treasury in an October 15th application, the program will provide up to $25,000 in mortgage aid to a homeowner who is out of work or working for at least 25 percent less than his or her pre-crisis income. Homeowners will make the portion of their monthly housing payment that they can afford (no more than 31 percent of current monthly income) directly to IHDA, and in turn IHDA will pay the full monthly amount due on the mortgage directly to the mortgage lender or servicer.

While it acts like a loan modification in setting more-affordable terms for the struggling borrower, the IHDA program is more like getting your parents to help cover your bills when you can’t. IHDA is an intermediary covering the unaffordable part of the bill; the lender doesn’t know the difference between IHDA’s money and yours (although IHDA will make lenders aware that it’s paying the bill).

The aid will last up to 18 months per homeowner. “Currently, the average length of unemployment for borrowers averages six to eight months,” said Vanessa Hill, IHDA’s director of homeownership programs. “But we need to be available to assist the longer-term people.”

The cumulative difference between what the homeowner can pay and the total payments that IHDA makes will be recorded as a lien, as required by the U.S. Treasury, but in most cases, “no repayment will be expected,” Hill said. (People who sell their homes within five years will be required to repay a portion of the money.) Hill announced details of the program on October 25th at the Governor’s Conference of Affordable Housing at Navy Pier.

To qualify, a homeowner will have to:

• have a mortgage balance of less than $500,000;

• use the home as the primary residence;

• have no more than the three months’ worth of mortgage payments in liquid assets, not including retirement accounts; and

• be no more than six months delinquent on mortgage payments.

This last requirement keeps the program focused ”on the earlier phases [of financial distress] and prevents people from getting to the point of foreclosure,” Hill said. People who are already at or near foreclosure can receive other forms of assistance from IHDA and other agencies. IHDA estimates that as many as 27,000 Illinois homeowners will get help through the federal “Hardest Hit” program, but they will be “a drop in the bucket of the 700,000 people in Illinois who were unemployed [as of] this summer,” Hill said.

Hill stressed that the program can’t be launched immediately since the U.S. Treasury requires a full test run prior to launch, and IHDA has to build a new software system for the program. Because programs elsewhere have been beset with lost paper or fax documents, IHDA wants to make the entire process digital. Hill noted that several states received funding for similar programs in early 2010, but that only three have so far launched their programs.