A year after feds allocate funds, Texas launches program to help homeowners avoid foreclosure because of COVID-19

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Texas is launching an $842 million fund aimed at helping homeowners avoid foreclosure caused by the COVID-19 pandemic — a year after U.S. lawmakers allocated the funds.

The program — called the Texas Homeowner Assistance Fund — is aimed at homeowners who have struggled to pay their mortgage, property taxes, home insurance and home-related fees because of economic hardships caused by the pandemic. The Texas Department of Housing and Community Affairs, the state agency that oversees the program, began taking applications this week.

“We take the financial hardships of our fellow Texans very seriously,” Bobby Wilkinson, TDHCA executive director, said in a statement.

It took Texas nearly a year to get the program off the ground — slower than it took many other states. President Joe Biden signed the American Rescue Plan Act, the $1.9 trillion economic stimulus bill, last March — which set aside more than $10 billion to intended to help homeowners stay in their homes.

Twenty-five states including California and New York got their programs up and running before Texas, according to the National Council of State Housing Agencies. Ten states including Texas have run pilot programs. To date, Texas has distributed about $5 million to more than 600 households to help homeowners make mortgage payments through two pilot programs, according to TDHCA.

That money could have helped struggling homeowners a lot sooner, said Amir Befroui, an attorney who oversees the Foreclosure Prevention Project at the nonprofit Lone Star Legal Aid. He attributed the pace to a lack of urgency from TDHCA.

For example, Befroui said, the funds could have helped a client of his — an East Texas woman in her 80s — avoid foreclosure. The woman holds a reverse mortgage on her home near Longview, which requires borrowers to stay up to date on their insurance and property taxes. But after her husband died, she fell behind on those payments — and the lender foreclosed on her home.

“If this money had been rolled out at any point in 2021, I could have saved the house,” Befroui said.

The program required "extensive planning with outside stakeholders and analysis" before Treasury approved TDHCA's plan, agency spokeswoman Kristina Tirloni said.

The Treasury Department issued guidelines for state-level homeowner assistance programs last April — and TDHCA aimed to send its plan to Treasury by the end of September after getting public input on the program, according to the agency’s website. The state’s plan received federal approval in January and launched "a little more than 30 days later," Tirloni said.

Homeowners have to prove they suffered financial hardship caused by the pandemic in order to qualify for assistance. The program will cover up to $40,000 in overdue mortgage payments — and as much as $25,000 for overdue payments on property taxes, property insurance and fees demanded by homeowners’ or condominium associations. The agency projects the program could assist between 55,000 and 70,000 households.

The new program signals a shift at TDHCA from assisting renters hit hard by the pandemic to helping homeowners. The agency stopped taking applications for its federally funded rent relief program in November, citing dwindling funds.