Michigan’s plan to spend $154.5 million in federal funds to help those hardest hit by the economy has gained federal approval and will be available starting July 12.

The funds – targeted at helping borrowers facing pay cuts or job losses keep their homes – are expected to aid more than 17,000 Michigan households.

Until then, Michigan State Housing Development Authority officials will educate banks and credit unions about the process of evaluating borrowers for the program. Borrowers must apply with their lenders to take advantage of the lifeline, which will be awarded on a first-come, first-serve basis.

• FAQs: Answers about the new homeowner help.

State officials say they’ll tell borrowers within 48 hours if they qualify for one of the program’s three options:

• Mortgage payment assistance for homeowners now receiving unemployment compensation. The state would provide half of the monthly mortgage payment up to $750 a month for a maximum of 12 months.

• Rescue funds for homeowners who have fallen behind on their mortgage payments because of a temporary layoff or medical emergency and have overcome this obstacle. The state will provide up to $5,000 to families in this situation.

• Federal matching funds for principal reductions for homeowners who can no longer afford their mortgage payments as a result of reduced income. This will allow up to a $10,000 principal reduction from the state that will be matched by the lender.

Gov. Jennifer Granholm and the Michigan State Housing Development Authority announced a plan to spend the money in April – two months after President Barack Obama announced that the five states hardest hit by the housing crisis would share $1.5 billion in funding.

Michigan will be the first of those five states – ahead of Nevada, California, Florida and Arizona — to implement its program.

“We will invest the resources provided by the Obama administration as quickly and efficiently as possible to help Michigan homeowners avoid the devastation of foreclosure,” Granholm said in a statement.

The program does not make participation mandatory.

Michigan’s unemployment rate of 13.6% is one of the highest in the nation. The state has had a 35% decrease in average home sale prices since 2005.

Previous government programs designed to help distressed homeowners required that they had income. So many were left out.

While 17,000 represents a small percentage of Michigan homeowners in need, the plan will still help shrink the problem, according to GreenPath Debt Solutions, a Farmington Hills-based counseling firm.

Last year, GreenPath counseled 76,645 homeowners who were delinquent on their mortgages because of job loss or reduced pay, adjusted mortgages and other unforeseen changes.
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http://www.freep.com/article/20100623/NEWS06/100623004/1017/Business04/Michigan-to-offer-154M-in-aid-to-homeowners