BY SARAH ROSS

SALEM- When homeowners in financial straits first spotted a state program to help them pay their mortgages last fall, it seemed like the perfect opportunity to save their homes from foreclosure.

But while assistance was expected to reach banks in February, the payments only started being applied to loans for most last month.

Established about one year ago, the Oregon Homeownership Stabilization Initiative (OHSI) was created with the Department of Housing and Community Services to disperse stimulus funding from the federal government to Oregonians struggling to make their mortgage payments.

As of the beginning of July, the initiative had paid out over $6 million in mortgage payments covering about 3,000 loans. The department hopes to help 5,000 homeowners with its Mortgage Assistance Program. More than 18,000 homeowners have applied.

The payments are designed to be an interest-free loan program for eligible homeowners. However, up to 20 percent of each loan can be forgiven every year, and payments back to the department can be deferred.

“This money is designed to help them get through this rough patch and not set them up for a bigger problem,” said Lisa Joyce, policy and communication manager for OHSI’s parent agency, Oregon Housing and Community Services.

To receive assistance from OHSI, applicants must meet a number of criteria including having lost over a quarter of their income in the past year, having been earning less than 125 percent of the state’s average income, and not being in bankruptcy.

The agency partnered with over 24 nonprofit groups at the county level last fall to help process applications.

While these partners were brought on early, problems arose which prevented them from meeting their mid-January deadlines with OHSI.

Ben Pray, spokesman for OHSI, said much of the delays came from having to work with over 150 loan servicers involved with the program’s applicants and enrolling them in the program.

“Trying to bring that many parties to the table, that turned out to be a real challenge,” he said.

Pray described the process as not just enrolling these banks in the state program, but educating them about it, setting up confidential data and e-mail exchange programs, and then sending the documents to make the payments.

Additional delays came from the involvement of some legislators who helped to craft OHSI policies like requiring a financial fitness class for program participants. But the agency said most of the delays truly came because the program is new.

“In essence, the delays are because it’s a brand-new program,” said Pray.

Some also said that evolving polices and eligibility criteria also presented a problem for the partner organizations.

“They were anxious to get out there and help folks in trouble,” said Martha Lyon, executive director for the Community Services Consortium in Corvallis. “I think they just went too fast.”

While the partners were told that applications each would take less than an hour to approve, the commitment for the groups grew as OHSI continued to gain its footing in the state.

“It called into play a lot of our other resources, and it made it [the job] very difficult financially on our agency,” said Lyon.

As delays ensued, staff at the agencies began having to negotiate with lenders to help their OHSI clients prevent foreclosures.

Because of the delays in assistance, Emily Reiman, executive director of the Neighborhood Economic Development Corporation (NEDCO), told Oregon Capitol News that her office had been negotiating with banks and lenders to hold off foreclosure dates for 40 to 50 homeowners.

But two of NEDCO’s clients were not able to prevent their homes from being foreclosed on. Of the two homeowners, one had not contacted NEDCO until their foreclosure sale date. The other’s lender was not willing to negotiate with the agency to delay the sale date.

Like the case for Lyon, Reiman said her agency found itself having a larger than expected commitment to the mortgage assistance program.

But while she said the program has led to some long hours this past winter, the program has helped the agency become better known in the communities it serves and will allow NEDCO to expand its services.

Eighteen states, tagged by the federal government as “Hardest Hit,” received federal stimulus funding for the mortgage assistance programs.

Oregon’s department is not the only one that has faced criticism for taking too long to get federal funding to citizens in need.

“I think we’ve all been accused of taking too long or somehow dragging our feet in getting these programs going,” said Diane Richardson, program director for the Keep Your Home California program.

“The truth of the matter is that these are all brand new programs which we’ve had to create from scratch,” she said, adding that the programs have a fiduciary responsibility to disperse the funding responsibly.

“I know that there are a lot of homeowners out there that expected to receive the assistance much sooner than this,” said Reiman. “And the logistics is an explanation of the delay but not necessarily an excuse for the delay.”

Reiman said her agency has been doing foreclosure counseling since the beginning of the foreclosure crisis, but the OHSI mortgage assistance program was the first time they were given money to actually stop homes from being foreclosed on.

“It’s one of those things where you suffer through a really unpleasant process because in the end you hope that 300 homeowners [in Linn and Lincoln counties] are going to be able to retain their homes,” said Lyon.

–This article was a joint reporting project with Alan Searle of Yaquina Wavelength, a partner of the Oregonian News Network.