Fumo, the Democratic chairman of the Senate Appropriations Committee, promised to make the Homeowners Emergency Mortgage Assistance Program (HEMAP) a top priority in the upcoming budget cycle.

     The fund provides temporary assistance in the form of a loan for working people who lose their jobs. When the workers find new jobs, they repay the loans. Since changes were made to the program and the General Fund appropriation was eliminated in 1998, participation has fallen significantly, despite the fact that applications have risen during the past two years because of the slowing economy.

     "The need for this program has been increasing lately. Although I realize that it will be a tight budget year because of the weak economy, that’s exactly when this type of aid is in greatest demand," Fumo said.

     Fumo and other Democrats opposed the elimination of the appropriation.

     Lately, however, Ridge and Gov. Mark Schweiker have demonstrated keen awareness of the important role that the state should play in making sure that a change in employment situation does not disrupt a family’s home life. Although Ridge left state service to take a position as head of national homeland security, he has accepted a state offer of rent-free living in the governor’s mansion for nearly four months.

     "Obviously, the leaders of the administration now recognize that when the primary breadwinner experiences a dramatic or sudden change in his job situation, the government can help prevent the family from winding up out on the street," Fumo said.

     "If we can provide a grant to Tom Ridge just because he changed jobs, surely we can provide a loan to working-class men and women who lose their jobs," he added.

     Although requests for help from HEMAP have increased each year since 1997 and hit a record level in 2001 as state unemployment rose, both the number of loans approved and the dollar amounts of those loans have declined over the past five years.

     In 1997, HEMAP received 5,928 applications for help. It approved 2,093 loans and disbursed $18 million. By 2001, despite receiving an all-time high of 8,381 requests, HEMAP shrank to 1,710 loan approvals and disbursed only $11.5 million.

     HEMAP’s fund balance, which stood at $5.6 million as of July 2001, is projected to fall below $3.2 million by the end of this fiscal year. If demand for loans continues to grow, it could run out of money by 2003.

     Fumo said he will propose restoring the line item to at least a $10 million annual appropriation. In addition, he will seek legislative changes that will reverse the more stringent eligibility requirements enacted several years ago.

     In particular, Fumo said he will advocate a return to giving borrowers 36 months of assistance instead of 24, at a cost of $5 million annually. Another $5 million would go toward ensuring the program’s solvency through 2004.

     Nearly 80 percent of applications for HEMAP assistance were rejected last year. Although some were legitimate denials, Fumo hopes the additional funding would encourage more compassionate lending decisions that would result in another 350 families per year being served.

     HEMAP was established in 1983 to provide mortgage assistance to homeowners attempting to avoid losing their homes through foreclosure. Eligibility limits restrict aid to those facing foreclosure due to the loss of employment or other circumstances beyond their direct control.

     The second Ridge budget, introduced in February of 1996, proposed elimination of any future General Fund support for HEMAP, which had received $18.5 million the previous year. The General Assembly eventually approved a $3 million appropriation that kept the program operating at reduced levels.

     The Pennsylvania Housing Finance Agency (PHFA,) which administers the program, prepared to shut down HEMAP because of lack of funds, but the General Assembly approved a $10 million appropriation in 1997-98.

     Act 160 of 1998 made substantial changes to the program to reduce the amount and time period of financial assistance, and to further restrict eligibility. The curtailed program then became self supporting through loan repayments, and General Fund support ceased.

     The Act 160 changes restricted eligibility to loans that were delinquent 24 months or less. The previous limit was 36 months. Assistance could continue for 24 months, reduced from 36 months. Also, payback provisions were amended to require loan recipients to begin repayment as soon as their housing payments did not exceed 40 percent of their net income. The previous ceiling was 35 percent.

     In 1996 when Ridge first called for the elimination of the HEMAP appropriation, he made other major budget cuts, including a dramatic reduction in health care coverage. He took Medical Assistance away from several hundred thousand poor Pennsylvanians, claiming his budget would have a $250 million deficit if those cuts were not made. The state actually ended that fiscal year with a $576 million revenue surplus.

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