Families with reliable incomes "are being denied mortgage modifications because they have small outstanding debts," according to the office of Attorney General Eric Schneiderman.

New York State has launched Mortgage Assistance Program, a loan modification alternative for borrowers at the brink of foreclosure.

The NYS MAP loans enhance the state's Homeowner Protection Program, which was introduced in 2012 to offer free legal and housing counseling services to financially distressed homeowners, New York attorney general Eric Schneiderman said in a press release Thursday.

Homeowners applying for the program will work with HOPP counselors or legal advisors. The MAP loans, which cannot exceed $40,000 per borrower, may be used to pay off arrears including mortgage payments or unpaid interests and fees, pay down second or third mortgages and property tax liens, or to reduce mortgage principal.

The attorney general's office maintains that while HOPP has assisted more than 28,000 families it cannot help many families with credit glitches. State research data shows many families with reliable income streams "are being denied mortgage modifications because they have small outstanding debts" or occasional defaults such as a series of missed mortgage payments, delinquent second or third mortgage liens, or unpaid property taxes that must be paid before a first mortgage holder will grant a modification. The NYS MAP is designed to fill that gap.

“For many families across New York State, receiving a small loan through this program will mean the difference between a mortgage modification and the loss of a home,” Schneiderman says.

The program is modeled after a New York City funded pilot program administered through the Center for New York City Neighborhoods and has already been tested in the Big Apple. In one example, a HOPP grantee in the Bronx who received a $22,000 loan through the MAP pilot was able to pay down the mortgage and reduce monthly expenses payments by $300. “Despite reports of an improving housing market, communities all over New York are still struggling from the impacts of the housing crisis," said Christie Peale, Executive Director of the Center for NYC Neighborhoods, MAP  loans "will keep hundreds of families in their homes.

The processing of applications for MAP loan assistance will begin on Sept. 15 in Long Island, the area worst hit by the foreclosure crisis. State officials plan to initially roll out the program in Long Island in recognition of the fact that at 11.1% it has the highest rate of mortgage loans that are 90 days or more delinquent but not yet in foreclosure in the state. Certain communities, such as Brentwood and Hempstead, have even higher rates of 24% and 28%, respectively.

The MAP loans will become available to homeowners statewide starting Oct. 15.

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