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Published August 9 2021 updated August 10 2021 13 min. 22 seconds read
Summary at a Glance
Financial hardship means a material reduction in income or material increase in living expenses associated with any federally declared disaster and in this article we will use the coronavirus pandemic as our current federally declared disaster.

To assist you better I'll layout what an average family of 4 in a specific area of Louisiana should be. Then, to show the different income levels compared to available assistance I'll bring into the article different income scales that are real to many areas in the USA. 

"Financial hardship means a material reduction in income or material increase in living expenses associated with any federally declared disaster and in this article we will use the coronavirus pandemic as our current federally declared disaster."

Midian Income (100% AMI) for a family of 4 in East Baton Rouge / Livingston Parish (2021).

  • A salary of $79,300 equates to a monthly pay of $6,608, weekly pay of $1,525, and an hourly wage of $38.13.

More realistically I'll be using incomes closer to those that will be in need of mortgage assistance. If you are currently making $38.13 and have a family of 4 the programs will provide you with financial planning more than assistance. It's more how you are using your money and that might mean your spending habits need to be adjusted.

In the same geographical areas we'll find families are working from a single income so I'll use the HUD income scales for a single person in a single person household. You can look up your specific household income numbers to get a better idea of what federal assistance you will qualify for. To save additional time I'll bring things into perspective based on HUD's income classifications. 

Percentage calculation is from 100% Area Median Income (AMI). HUD classification for household earnings.

  • Low Income (80% AMI) Limits: Single $44,450 Family of 4 $63,450
    • $44,450 equates to a monthly pay of $3,704, weekly pay of $855, and an hourly wage of $21.37.
    • $63,450 equates to a monthly pay of $5,288, weekly pay of $1,220, and an hourly wage of $30.50.
  • Very Low Income (50% AMI) Limits: Single $27,800, Family of 4 $39,650
    • $27,800 equates to a monthly pay of $2,317, weekly pay of $535, and an hourly wage of $13.37.
    • $39,650 equates to a monthly pay of $3,304, weekly pay of $763, and an hourly wage of $19.06.
  • Extremely Low Income (<50% AMI) Limits: Single $16,700 , Family of 4 $26,500
    • $16,700 equates to a monthly pay of $1,392, weekly pay of $321, and an hourly wage of $8.03.
    • $26,500 equates to a monthly pay of $2,208, weekly pay of $510, and an hourly wage of $12.74.

Many households fall under the "Very Low Income" bracket and will have to show hardship and that if without your hardship you could make your income to afford your housing. A simple lose of a part-time job or a reduction in hours can contribute to falling into a HUD category that needs justification to be eligible to receive mortgage assistance. 

The only group that does not have to provide hardship information is the Extremely Low Income group. This group also happens to not typically be a homeowner so it really doesn't apply. But, one caveat, the programs are looking to make available funds to allow any income group into home ownership. Ownership vs. ability to maintain are other issues but as of this day their are programs under FHA and USDA federal loans that would be able to fund low cost housing loans to low and extremely low income households. 

QUALIFIED EXPENSES

HAF participants may use funding from the HAF only for the following types of qualified expenses that are for the purpose of preventing homeowner mortgage delinquencies, homeowner mortgage defaults, homeowner mortgage foreclosures, homeowner loss of utilities or home energy services, and displacements of homeowners experiencing financial hardship:

  1. mortgage payment assistance
  2. financial assistance to allow a homeowner to reinstate a mortgage or to pay other housing-related costs related to a period of forbearance, delinquency, or default
  3. mortgage principal reduction, including with respect to a second mortgage provided by a nonprofit or government entity
  4. facilitating mortgage interest rate reductions
  5. payment assistance for:
    1. homeowner's utilities, including electric, gas, home energy (including firewood and home heating oil), water, and wastewater
    2. homeowner's internet service, including broadband internet access service, as defined in 47 CFR 8.1(b) (or any successor regulation)
    3. homeowner's insurance, flood insurance, and mortgage insurance
    4. homeowner's association fees or liens, condominium association fees, or common charges, and similar costs payable under a unit occupancy agreement by a resident member/shareholder in a cooperative housing development and
    5. down payment assistance loans provided by nonprofit or government entities
  6. payment assistance for delinquent property taxes to prevent homeowner tax foreclosures
  7. measures to prevent homeowner displacement, such as home repairs to maintain the habitability of a home, including the reasonable addition of habitable space to alleviate overcrowding, or assistance to enable households to receive clear title to their properties
  8. counseling or educational efforts by housing counseling agencies approved by HUD or a tribal government, or legal services, targeted to households eligible to be served with funding from the HAF related to foreclosure prevention or displacement, in an aggregate amount up to 5% of the funding from the HAF received by the HAF participant
  9. reimbursement of funds expended by a state, local government, or entity described in clause (3) or (4) of the definition above of "eligible entity" during the period beginning on January 21, 2020, and ending on the date that the first funds are disbursed by the HAF participant under the HAF, for a qualified expense (other than any qualified expense paid directly or indirectly by another federal funding source, or any qualified expenses described in clauses (6), (7), (8), or (10) of this definition) and
  10. planning, community engagement, needs assessment, and administrative expenses related to the HAF participant's disbursement of HAF funds for qualified expenses, in an aggregate amount not to exceed 15% of the funding from the HAF received by the HAF participant. 

Arrearages of qualified expenses are eligible for purposes of HAF regardless of the date they were incurred, including if they arose before January 2020.  Funding from the HAF may not be used for any use other than those provided for in this section.  To the extent that HAF participants use HAF funds to supplement other loss-mitigation efforts, Treasury encourages participants to avoid using HAF funds in a manner that replaces other loss-mitigation resources that would otherwise be available.  The HAF Plan (described below) will enable HAF participants to indicate whether they are requesting reimbursements under clause (9) above.

ELIGIBILE HOMEOWNERS

Financial hardship: "Financial hardship means a material reduction in income or material increase in living expenses associated with the coronavirus pandemic that has created or increased a risk of mortgage delinquency, mortgage default, foreclosure, loss of utilities or home energy services, or displacement for a homeowner. "

Financial Hardship calculations following HUD guidelines which will be nearly the same as the US Treasury Departments calculations. You'll have a couple of options to share your hardship with your state. It appears that the U.S. Treasury is making states take your word on things so paperwork doesn't slow you down in getting the assistance you need. But, simply because documented proof isn't needed up front you may be asked to provide the documents that support your claims. They will have your income based on the T-4506 form you submit, but is that from all household members earning wages in your household that are 15 years of age or older? That's when your honesty will come into play calculating incomes. Many have earnings that are not calculated correctly from time to time.

Homeowners are eligible to receive assistance for their primary residence if they experienced a financial hardship after January 21, 2020 (including a hardship that began before January 21, 2020, but continued after that date) and have incomes equal to or less than 150% of the area median income (AMI) or 100% of the median income for the United States, whichever is greater. 

How to calculate your 100% and 150% AMI to match how the U.S. Treasury Department and your State Housing Commission will calculate the numbers.

Calculate 100% of the area median income (AMI) for a household means two times the income limit for very low income families. Using the example data above ($27,800, Family of 4 $39,650) we can find 100% AMI for a single income, single person homeowner by this calculation, $27,800 * 2 = $55,600 would be 100% AMI and for a family of 4 using the same calculation $39,650 * 2 = $79,300 which matches FY 2021 Income Limits Documentation System from HUD. Unless otherwise instructed you will always use the most current dataset for your disaster. 

Calculate 150% of the area median income (AMI) for a household means three times the income limit for very low income families. Using the example data above ($27,800, Family of 4 $39,650) we can find 100% AMI for a single income, single person homeowner by this calculation, $27,800 * 3 = $83,400 would be 100% AMI and for a family of 4 using the same calculation $39,650 * 3 = $118,950 which matches FY 2021 Income Limits Documentation System from HUD. Unless otherwise instructed you will always use the most current dataset for your disaster. 

If the wording for your eligibility states you must be under 150% AMI then using the HUD dataset find your income and household member number and do the math. 

Homeowners to attest that they experienced financial hardship after January 21, 2020. The homeowner must describe the nature of the financial hardship (for example, job loss, reduction in income, or increased costs due to healthcare or the need to care for a family member). You should start drafting this short summary now to make sure you understand what you are swearing (attesting) to.

Income Determinations. With respect to each household applying for assistance, state government may use HUD's definition of "annual income" as described in 24 CFR 5.609 or use adjusted gross income as defined for purposes of reporting on Internal Revenue Service (IRS) Form 1040 series for individual federal annual income tax purposes. 

Homeowners must have a reasonable basis under the circumstances for determining income for purposes of the requirements described above under "Eligible Homeowners."
Here are two of the most basic methods for income verification that are permissible:

(1) the household may provide a written attestation as to household income together with supporting documentation such as paystubs, W2s or other wage statements, IRS Form 1099s, tax filings, depository institution statements demonstrating regular income, or an attestation from an employer; or

(2) the household may provide a written attestation as to household income. State government will have the option to take the this information and conduct a reasonable fact finding effort regarding the average incomes of the household's geographic area. 

(1) defined means income that can be proven by providing documents. If you started a new job and didn't file taxes because of the amount or your exception status you can provide a W2 form or a couple of weeks paystubs that would prove you were working at or before the date of January 21, 2020. You could actually file taxes now and submit your new tax returns as long as you have proof you worked before the January 21, 2020 date. You can prove this by showing deposits that total to match your taxes, etc. You're income has to be proven which allows you to declare any amount of income as long as you earned money.

(2) defined means unverifiable information in which you swear is true. The times you would use this is when you have lost never had documents providing proof of income and you did everything in your power to obtain these documents but were not able to obtain them. You would then create a summery brief documenting how your attempt was conducted then you would attest that the information you are providing is legal acknowledgement of the authenticity of a statement and/or document and that your verification followed logical and proper processes.

Note; At anytime in the process unless specifically stated you will be given the opportunity to appeal any negative outcome. You might not be informed by the state agency processing your application so take this as your first and final notice that you can and will appeal anything that reacts negatively toward you being awarded the federal assistance you need and require. (Murray W.)

State agencies may provide waivers or exceptions to this documentation requirement as reasonably necessary to accommodate extenuating circumstances, such as disabilities, practical challenges related to the pandemic, or a lack of technological access by homeowners; in these cases, the state agency is still responsible for making the required determination regarding household income and documenting that determination. The two types of processes are managed differently at the state agency level. Waivers typically are requested to assist a large group of people and would be processed to the appropriate federal agency or at least reviewed and approved by the federal agency. When asking for an Exception this is a one on one and one-time process only needing the state agency to approve the exception. Typically an exception panel or review board is assembled to judge the merits and if the exception would violate any standing policy. You would file an exception request with your first appeal. I will offer appeal letters formatted with cause and remedy so you don't appeal a process or ruling without cause and remedy. 

If your state government agency chooses to require households to provide supporting documentation for purposes of income determination, you will have your first hurdle at this point. The US Treasury is advising state agencies to avoid establishing documentation requirements that may put barriers up against eligible households. This is a concern with households that have irregular incomes. You may have been a gig worker and advertised yourself via Craigslist and never paid by the same person twice and never paid over $600 to generate a 1099 form. If your state sets a policy to require documentation and you are a independent contractor be sure to reach out to your congressional representative and Murray W. from TruckAndTools.Com to build a action plan. Small business owners often have irregular incomes and are not always documented.

The U.S. Treasury Department advises states not to add additional eligibility criteria such as foreclosure status, credit score, bankruptcy status, the existence of liens on the property, or previous cash-out refinances. 

If your state issues additional eligibility criteria your state will have to submit in writing the reason for the additions and must explain with specificity how the new criteria would further assist the objectives of the state to include how they would help each homeowner in the program.

The U.S. Treasury Department has mandated that not less than 60% of the funds allocated to each state will be made available to each homeowner and must be used for qualified expenses that assist homeowners having incomes equal to or less than 100% of the area median income or equal to or less than 100% of the median income for the United States, whichever is greater.  Any amount not made available to homeowners that meet this income-targeting requirement must be prioritized for assistance to socially disadvantaged individuals, with funds remaining after such prioritization being made available for other eligible homeowners. 

States often are awarded under the law a percentage of the total amount of funds awarded for administrative costs and other expenses. These percentages are typically 6% for most disaster or emergency funds. States normally find ways to outsource most of the administrative duties which is above the 6% threshold for the states costs. You should be aware that if oversight is not provided by your states OIG you could experience a loss in available funds for homeowners because of exuberant costs that the state managers have added to the program. 

 

 

 

 

 

 

 

 

 

 

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