Mortgaging a Safety Net: Corbett budget axes bi-partisan HEMAP program that heads off foreclosures | News | Pittsburgh | Pittsburgh City Paper

Mortgaging a Safety Net: Corbett budget axes bi-partisan HEMAP program that heads off foreclosures

"It's not only helped individual homeowners, but entire communities"


Once again, Americans are in for a political season in which the airwaves will be filled with charges of "socialism," as politicians argue over government's proper role in the economy. And it's natural to wonder: Isn't there any government program that people from across the ideological spectrum support? A program that can help people without being accused of "coddling" them?

In Pennsylvania, at least, the answer is "yes." It's called HEMAP, and it has helped thousands of Pennsylvanians keep their homes. But in Gov. Tom Corbett's Pennsylvania, it has died for lack of funding.

HEMAP — the Homeowners' Emergency Mortgage Assistance Program — was established in 1983, to fend off a wave of home foreclosures resulting from a recession and the steel industry's collapse. Under HEMAP, a mortgage holder had to warn a property owner before foreclosing on a home. The owner could then apply to the Pennsylvania Housing Finance Agency (PHFA) for a loan to help cover house payments. Loans were given only to those who suffered a financial calamity like a layoff, and they had to be repaid — though installments could be as low as $25 a month. The agency held a stake in the home until the debt was repaid. 

"It's been a very successful program for years," says Greg Simmons, a development and compliance manager at Pittsburgh housing nonprofit ACTION-Housing.

The program has aided more than 46,000 homeowners statewide, and a recent study by The Reinvestment Fund found that between 2008 and 2010 — a time when foreclosures swept the country — HEMAP kept 6,200 Pennsylvanians, including 441 Allegheny County residents, in their homes. HEMAP relied on about $10 million in taxpayer money a year, but the Fund estimates that it spared nearly a half-billion dollars in foreclosure-related costs.

"[P]recious few programs have the track record of HEMAP," the Fund concluded.

"We've seen the good that this program does," agrees PHFA spokesman Scott Elliot. "It's not only helped individual homeowners, but entire communities." 

But HEMAP was killed last summer, a casualty of the deep cuts in Gov. Corbett's first budget. Legislators were able to reinstate $2 million in funding — not enough to keep the program viable. Corbett's new budget proposes no new funding.

"We were devastated" by the program's loss, says state Sen. Jim Ferlo, a Lawrenceville Democrat.

The state may already be feeling the effects: Foreclosure-tracking firm RealtyTrac documented a 24 percent rise in Pennsylvania foreclosures in January. RealtyTrac spokesman Daren Blomquist says there are numerous reasons for the uptick. Still, he adds, "There's probably some impact [on foreclosure rates] now that there isn't that safety net."

Matt Campion, chief of staff for state Sen. John Pippy, says there's no guarantee HEMAP will return. While Campion says Pippy backs the program — "It's had real results," he says — he sighs when asked about its future prospects. "I couldn't even venture a guess." The haggling over next year's budget is just underway, he notes: "We have to deal with the money we have, and there are a lot of ideas on how it should be spent."

Restarting HEMAP would require one-time "ramping-up costs" of $25 million, says Elliott. And ironically enough, the mortgage industry itself may have provided a place to find it.

Weeks ago, five major banks agreed to settle a lawsuit filed by 40 state attorneys general — including Pennsylvania's — alleging fraudulent foreclosure practices. In addition to reimbursing some homeowners, the settlement grants a windfall to the states themselves; in Pennsylvania's case, that would be $69 million. 

Simmons calls the money a "potential godsend" for HEMAP. But so far, state budget officials have been noncommittal.  State budget secretary Charles Zogby told Philadelphia radio station WHYY-FM that "it may be a little premature" to discuss HEMAP funding. One Republican governor, Wisconsin's Scott Walker, is already seeking to use most of his state's settlement for balancing the budget. 

Campion says the chief threat to HEMAP is "this financial tornado. Much of the state's money comes from income and sales tax, so when people aren't making or spending money, there's less revenue" for programs like HEMAP.

Of course, it's precisely when people aren't making money that a program like HEMAP is most needed. "It's a double-whammy," Campion agrees.

Complicating the picture is Corbett's plan to continue phasing out the Capital Stock and Franchise Tax, a levy on business assets. Corbett's budget estimates that the phase-out will cost nearly $250 million next year — roughly 10 times as much as HEMAP would need.

Ferlo, who sits on the Senate appropriations committee, says such priorities reflect a desire "not just to cut the budget, but to cut it for ideological reasons: ‘How do we get out of providing services on the state level?'" Still, he adds, "I think we'll be able to move on the program. A lot of my Republican colleagues have been supportive."

Indeed, even some free-market ideologues regard HEMAP benignly. "I don't think it's egregious," says Eric Montarti, a senior policy analyst at the Allegheny Institute for Public Policy, a conservative think tank that ordinarily looks askance at government intervention in the marketplace. "It seems to be for extreme circumstances that are beyond people's control — and there is a repayment method. This isn't a too-big-to-fail bailout."

So will HEMAP return? 

"How optimistic or pessimistic I am," says Simmons of ACTION-Housing, "depends on who I talked to last."

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