Homeowner Assistance Fund applications paused in Pennsylvania

The Pennsylvania Housing Finance Agency has put new applications for the state's Homeowner Assistance Fund program on hold so it can manage the distribution of the money itself rather than through a vendor.

The move follows allegations that the response times of the vendor handling payments have been excessively slow, in part due to problems communicating with servicers. That was reported first by Spotlight PA, a news outlet backed by a coalition of local publications.

"As part of the transition, the third-party vendor will be responsible for fully completing applications that have been partially disbursed but are pending additional payments by March 31, 2023. This will allow for a clean transition between systems for audit and control purposes. All other applications will be processed by PHFA," the agency said in a press release.

Outside of that transitional work, the PHFA's administration of the federal funds, which are distributed at the state level, will begin on Feb. 6. It will be using a new system and call center to process applications and handle inquiries and information that will be sent to program participants. Existing applicants will not need to start new applications.

"The decision by PHFA to fully administer the program will better leverage the agency's deep knowledge of Pennsylvania's housing market and its broad network of mortgage lenders, community partners, and housing counseling agencies," the agency said.

Pennsylvania received $350 million from the Homeowner Assistance Fund for administration and distribution. The money was intended to help ease the transition away from foreclosure-related restrictions instituted during the pandemic to help homeowners weather related hardships. The state has disbursed $89.6 million in funds to homeowners so far.

The administrative difficulties with the Pennsylvania program are a wake-up call, pointing to the need to prioritize communications related to the HAF program not only for those administering it at the state level, but also for cash-strapped mortgage companies, which can benefit from the receipt of the funds when they're used to cover delinquent loan payments.

Servicers have been warned by the Consumer Financial Protection Bureau and the Federal Housing Finance Agency that they bear responsibility for ensuring the assistance helps homeowners as intended.

The Federal Housing Administration, which backs loans made to particularly vulnerable borrowers with lower incomes, has also indicated that servicers are responsible for ensuring HAF relief is applied where needed.

HAF funds are used commonly to cover delinquent mortgage payments but also may be used for other housing expenses like utilities or taxes.

Complications related to the distribution of HAF money and communication with mortgage companies have not been limited to Pennsylvania.

A woman in Florida recently discovered her servicer had not received some of her HAF payments, and it was later found they'd been funneled to the wrong mortgage company, according to a report by Orlando-area news outlet WKMG.