Michigan's housing assistance program is overflowing with applications
Updated 2 years ago on October 17, 2022
More than16,000 Michigan families are on the waiting list for assistance to stay in their homes and keep the lights on, but because of the bottleneck of the state agency that approves the money, it takes several weeks to disburse it.
Earlier this year, a record high number of applications and a shortage of staff at the Michigan Housing Development Authority, the agency responsible for distributing the money, caused the delay. According to housing counselors, delays could put stranded homeowners at risk of utility shutdown notices or foreclosure if the program is not activated.
In mid-February, the state launched the Michigan Homeowner Assistance Fund, also known as MIHAF, a grant program for those who default on their mortgages and utilities, backed by $243 million in federal pandemic aid.
MIHAF offers up to $25,000 per family and is designed to keep Michigan residents - including those who may not have been able to take advantage of other funds, such as those designed for renters - in their homes.
"Ultimately, the consequences could be that people will lose their homes, be left without lights, without water if we don't find a way" to accelerate the program, LaKesha Hancock, director of counseling and a certified HUD consultant for Detroit-based U-SNAP-BAC, said last month.
Among the main needs she sees for MIHAF money, Hancock said, is help with property taxes and electricity and water bills. Of the 138 nonprofit clients who applied for the program, five were approved and moved on to the funding stage, Hancock said.
"You have to think about what our families are struggling with right now," said Stacy Tutt, senior attorney with the National Housing Law Project. "Rent prices are skyrocketing across the country, and if a homeowner loses their home, the chances of them being able to find affordable housing in the current situation are slim."
Application flow
According to housing counselors, the program has been sluggish so far. It's not entirely unexpected, and they're hopeful that things will pick up.
The statewide panel shows that as of Wednesday, 2,859 applicants out of 22,845 - or 12 percent - had been approved and funded. Another 2,783 applications were canceled, meaning the lender addressed the delinquency by loan modification, partial claims, or the family failed to respond to requests for information. Slightly more than 900 were denied because the household income may have been above the income limit or MSHDA could not verify residence or ownership of the property.
Meanwhile, about 71% of the applications are still in the queue. Of those, 12,764 applications are pending and 3,504 are "conditionally approved," which means the lender or utility company must certify delinquency.
Mary Townley, MSHDA's director of homeownership, said that when the program first started, there were a large number of applications, but the agency was not yet fully staffed.
"This has led to a delay in getting responses from homeowners," Townley told the Free Press last week. "We're getting over the big influx we got at the beginning of the program, and we're going to start slowing down our application times from the past."
In February and March, MSHDA received more than 14,000 applications and had about 20 employees. After that, applications dropped to about 2,000 families who applied in June. The agency currently employs 60 people and is looking to hire several more, Townley said.
It can take about eight weeks to get approval and up to 30 days to get financing. According to MSHDA, the timeline depends on how quickly servicers confirm delinquency.
"Between some process improvements and then full staffing, we can overcome any remaining bottlenecks we have," Townley said. Those improvements, she said, include the way staff handles cases.
The goal is to get the funds within 45 days, Townley said. As of Wednesday, MSHDA had spent about $20 million of its federal aid tranche. The average family gets about $7,000.
"We just weren't prepared for that volume in the first six weeks of the program," she said. Since then, it has "decreased a little bit," but MSHDA still gets "a fair number of applicants every week."
Help lifted a "heavy load
Taikima Mack, a resident of east Detroit, was on that initial waiting list. She applied on March 1 and, she says, was approved in late June.
Mack, a mother of seven, says she owes about $3,800 in property taxes on her home. Penalties and fees piled up even before the pandemic. But in 2020, she was even more delinquent because of bills that piled up after Mack and her sisters' families decided to live together during the pandemic.
She said she hadn't worked at her health care job in a little over a year because she didn't want to bring the virus home.
"When they decided to launch the MIHAF program for homeowners, it was a big weight off our shoulders ... it was something we had to rush and get done in time," Mac, 41, said.
Mack described the months between applying and being approved as a "waiting game. She worried that the money in the program would run out before it reached her.
The Wayne County Treasurer's Office announced earlier this year that taxpayers who apply for the MIHAF program before the March 31 deadline can protect their home from foreclosure.
Knowing that grants are on the way, she said, brings relief. She can go to work without having to make enough money to make up for overdue payments.
"Now I can work in peace instead of working in tension," Mack said.
According to MSHDA, last week, 562 of the 6,223 - or 9 percent - Detroit households that applied were approved and received funding. The average grant amount is about $3,000. Most of the approvals are for property tax refund assistance, followed by utility assistance.
Among Detroit households, 81 applications for mortgage assistance were funded, as well as 16 land contract cases. According to MSHDA, homeowners can receive assistance for more than one type of need.
"In July, if MSHDA can't handle the backlog, I think you're going to start seeing more foreclosure applications," said Beth Martinez, a HUD housing counselor and extension educator at Michigan State University Extension, a group that helps people apply for MIHAF.
Last month, Martinez reported that of the nearly 200 MSU Extension clients who applied to MIHAF for help, less than 10 percent had so far been approved and funded.
Sylvia Saldana, assistant director of housing stability services programs at the Wayne Metropolitan Community Action Agency, said many homeowners are working with servicers on repayment plans and other agreements.
"Fortunately, servicers are working with their borrowers and not foreclosing on their properties," Saldana said in an email. "The problem we foresee with the timing of foreclosures is that deferrals are expiring, and the length of time it takes to process applications can be a problem."
Unlike other safety nets set up to help renters who suffered financially during the pandemic, MIHAF helps a range of vulnerable homeowners - including those with land contract homes - who had limited assistance during the health care crisis.
Marilyn Mullane, executive director of Michigan Legal Services, says there are also concerns about land forfeiture cases in court that may not yet have been approved.
She said the court can either postpone these cases if an application has been filed against MIHAF, or if MSHDA can make it clear to vendors and the courts that while the applications are pending, confiscation proceedings should not proceed.
According to housing counselors, time is of the essence.
"These clients were caught between a hammer and anvil," Martinez said.
Townley said that after the application has been "conditionally approved," MSHDA files a request for a stay of foreclosure. Most lenders, she said, suspend foreclosure but require more than a week's notice before the sale.
Slow national deployment
In a plan submitted to the U.S. Treasury Department, MSHDA said the MIHAF program will help more than 13,700 households in Michigan.
Of the roughly 1 million mortgages serviced in Michigan, 3.7 percent were delinquent, according to MSHDA, citing 2022 Mortgage Bankers Association data.
An MSHDA brief sent to the Treasury Department noted - citing data from the Federal Reserve and the software company Black Knight - that mortgage delinquencies were more common in low-income areas than in higher-income areas. Loan delinquencies were also higher in low-income and minority neighborhoods, MSHDA said.
Housing experts say deferrals are coming to an end in the pandemic era, so programs like MIHAF are even more important. Moreover, according to the Federal Reserve Bank of Philadelphia, rising interest rates mean that loan modifications will not result in lower payments.
Of the 8.78 million mortgages in the U.S. that were deferred at the start of the pandemic, 15% are still unpaid, the Philadelphia Fed recently reported.
"I can assume there will be more people facing foreclosure because a lot of people took a deferral during COVID, and when the deferral comes to an end, a lump sum is paid," said U-SNAP-BAC's Hancock, who also served as a housing counselor during the last foreclosure crisis.
MSHDA works directly with servicers, such as mortgages or utilities, to obtain payments. The agency has a list of what it calls "participating partners.
"A lot of lenders, utility companies and tax collectors run out of patience and they start acting. They don't wait any longer, and then it doesn't become a solution," said MSU Extension's Martinez.
Federal loans suspend foreclosure for up to 60 days if someone has applied for the assistance program, but program administrators must notify the lender, says Sarah Mancini, in-house counsel at the National Consumer Law Center.
"One-third of homeowners have no protection from foreclosure as long as they apply for (Homeowner Relief Fund)," she said. "Delays put people at risk of losing their homes when they could have received this assistance. It's very important that all state programs, including Michigan, expedite the application approval process and get started as quickly as possible."
Townley said MSHDA is paying attention to applicants who say they are facing foreclosure and that their utilities have been cut off.
"It's a matter of time," she said. "If we can reduce the review time to 45 days, and if homeowners can contact us well in advance of a foreclosure, everyone will benefit."
Alex Macon, manager of homeowner assistance programs at Southwest Solutions, says the nonprofit has several homeowners who have been given sheriff's sale dates or disconnection notices, so a clear schedule is key.
Townley said MSHDA posts deadlines on its Web site.
"The logistics of trying to run these programs across the country have been a little overwhelming," Tutt said.
Slow implementation in Michigan is not unusual. It happens all over the country, Mancini said.
"There's still an opportunity to speed up the process and get more people approved faster," she said. "But ultimately the risk of that delay is that people will be foreclosed on while they're waiting for help, and that's something we don't want to see."
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