Arizona Is Sitting On Millions Meant To Help Homeowners Avoid Foreclosure

A foreclosed home in Phoenix. (Credit: AP)

Arizona homeowners were among the hardest hit by the housing crisis, but the state has withheld millions of federal aid dollars intended to help people avoid foreclosure. It has the worst record of the 18 that received the emergency funds, spending just 6 percent of the $268 million set aside for its struggling homeowners.

Arizona saw the second highest foreclosure rate during the housing crisis, which qualified the state for the federal “Hardest Hit” mortgage relief program. Yet since June 2011, it has denied funds to two out of every three people who applied for aid — far more rejections than in the others. Every other state that received federal funds only denied around 11 percent to 40 percent of applications.

(Credit: Arizona Republic)

As a result, Arizona barely used any of its allocated funds. As the Arizona Republic notes, more than half of the funds the state did use were eaten up by program costs, driving up its administrative spending to the highest in the nation. Though roughly 293,000 homes were foreclosed on between 2010 and 2012, just 1,550 homeowners got any help from the state since the federal funds became available in 2011. It originally predicted it would help 12,000 people keep their homes by the time the program ends in 2017, but now estimates it will help about 6,800.

Officials point to the state’s failure to focus on unemployment assistance, which is known as the fastest way to help homeowners struggling to pay their mortgages. Rep. Raúl Grijalva (D-AZ) argues that Arizona’s aid program made almost no effort to reach out to homeowners and let them know the funding was even available. He also blamed strict eligibility requirements that disqualified thousands of needy Arizonans.

The state’s housing recovery has made some modest gains, mainly around the Phoenix area. But the thousands of foreclosures the Hardest Hit aid was meant to prevent have dragged Arizona’s progress down.