Federal tax dollars flowing into California as subsidy

The 9-County Bay area including, the whole of California is going to be helped by the federal government allocation of tax dollars as subsidy – reason: foreclosure mitigation special for “weak” States. The financial health of these states – California; Florida; Arizona; Michigan and Nevada are seriously affected by twin diseases – increasing unemployment and decreasing home values.

The Emergency Economic Stabilization Act of 2008 (EESA) – as the name itself denotes was promulgated, with a view to stabilize the country’s economy two years back. It aims to bring the economy back on its original track, and take all steps in achieving this goal, which is must for solving the woes in all the sectors including Real Estate.

While it is often-repeated advice to keep the employment growth on a standard scale of 5 percent annually, the government is also burdened with repair work for the damages already caused. This is necessitated to keep things going and prevent situations falling out of control.

With this view, a special fund of $1.5 million has been drawn from this federal fund, created under the Act, which is going to be allocated to hardest- hit-states by foreclosure epidemic, so that the home owners in distress are financially helped. Out of this subsidy allocation, California gets the major chunk of $699.6 million.

The other states get – $418 million for Florida; $154.8 million goes to Michigan; Arizona is allotted with $125.1 million and Nevada gets $102.8 million. How these allocated funds are going to be spent?

Basically non-profit organizations sponsored by federal government have the authority to dole out these funds, to troubled home owners. In California it is going to be California Housing Finance Agency (CalHFA) and the plans are broadly – to help unemployed home owners in preventing foreclosures; upside down home owners facing the trouble in paying off the mortgage, since the value of their homes is below what they owe on their mortgage; and render financial assistance for people, who forfeit their home to foreclosure or hand over the keys under deed-in-lieu of foreclosures.

The “Keep Your Home” program of CalHFA will handle the funds whereby – unemployed home owners will get 6 months mortgage repayment of $1500; up to $15,000 assistance for past-due mortgages; principal reduction in mortgages equal to market levels of homes; and transition assistance for those moving from their homes under foreclosure.

Posted by Amitesh Kumar on Aug 11 2010. Filed under Economy. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry