Arizona Aims to Speed Delivery of Government Principal Reduction Funds
An industry vendor has begun to facilitate the delivery of government-funded principal reductions in an effort aimed at getting the relief to qualifying underwater borrowers in Arizona more quickly.
Frank Pallotta, managing partner, Loan Value Group, told this publication that his company is helping Arizona with the application process for certain monies from the Treasury’s Hardest Hit Fund that the state has chosen to allocate through a principal reduction assistance program.
The HHF is aimed at assisting states that suffered unprecedented home price declines and economic woes during the downturn. One way Arizona has been allocating these HHF monies is through its Save Our Home AZ Program, which includes a program that offers a principal reduction to certain borrowers’ loans if they complete a refinancing through the 2.0 version of the federal Home Affordable Refinance Program. The principal reductions are applied directly to the loans.
“The program exists, but they are not getting them done [at a] speed that is comfortable for both the homeowner and the state,” Pallotta said. “The biggest hurdle is that it is really a tough process. There’s a lot of coordination with the state and the consumer, then there’s coordination that has to happen with the state and the bank or their servicers.”
He said reaching the borrowers is “just not easy from an application standpoint. The banks are absolutely inundated, and…they’ve got everybody pounding on their door to try to do a HARP.”
Pallotta said Arizona asked LVG, which was originally known for providing operations that help lenders mitigate underwater borrower-related default risk by rewarding consumers for on-time payments, to help it reach borrowers who might qualify for the aforementioned Arizona program.
He said a growing number of clients who own assets with potential risks related to underwater mortgages they want to mitigate have asked for the company’s assistance in reaching them. But Arizona is the first public entity to do so.