One of the last safety nets protecting South Carolina homeowners from losing their homes will vanish next month because state officials didn't apply for federal money that pays for free foreclosure counseling.
The decision not to apply left local officials scrambling to find money elsewhere, but the search came up short. And the state's top counseling program is in question, putting South Carolina in a position to run out of money before even some of the hardest hit states.
The program has helped more than 8,000 struggling homeowners across the state ask their lenders for lower mortgage payments.
"We don't know where the next funding is coming from, and the free foreclosure counseling is in jeopardy if another round of funding (doesn't happen)," said David Geer, executive director of Family Services Inc.
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The free foreclosure help could start up again in the spring because Congress passed another $65 million for the program this month. South Carolina's housing agency and nonprofits would have to compete for that grant money, which could trickle down to the groups as early as March.
But Family Service's roughly $2.5 million in foreclosure help money will be long gone by then.
As a result, more South Carolina homeowners will have to navigate the complicated loan modification process alone, which leaves them with a worse chance of saving their home. People who receive professional counseling are 60 percent more likely to avoid foreclosure, according to the Washington, D.C.-based Urban Institute.
Mortgage counselors help homeowners through the complicated refinancing process and work with banks to keep people in their homes.
Foreclosure prevention programs across the country have been powered by about $355 million in federal money made available to nonprofits and state housing finance agencies through grants.
The S.C. State Housing Finance and Development Authority sat out the chance to apply for that money three times after a staffer mistakenly thought the state would receive the same amount of money if only Family Services Inc. applied. Instead, hundreds of nonprofits, including Family Services, competed for a pool of money that was smaller than what state housing finance agencies could apply for.
State housing finance officials later reversed their policy, saying they'll apply for future rounds of funding, but that may not occur for months.
Even foreclosure-devastated states like Florida, Nevada and California expect their money will last longer. Those three states recently were identified as having the worst foreclosure rates, according to California research firm RealtyTrac Inc.
South Carolina ranked 30th.
North Carolina, Michigan, Georgia and Nevada expect their funds to last until June 30, the last date to spend the money according the grant's provisions. Florida's money could last until June 1, while California could run out as early as April.
Only Arizona reported a funding shortage similar to South Carolina's.
"We've had one of the worst foreclosure problems here in Arizona, so they're running through the money very quickly," said Carol Ditmore, spokeswoman of the Arizona Department of Housing.
The department will continue to offer free foreclosure help to Arizona residents using money the agency has set aside for housing programs.
Such extra money seems unlikely from South Carolina's almost empty coffers.
Instead, Family Services counselors unsuccessfully sought money from other agencies such as the Department of Housing and Urban Development and mortgage giants Fannie Mae and Freddie Mac.
Geer even came up with a creative business proposition that could keep the agency's services running: evaluating a struggling homeowner's financial situation for banks. The group could charge $450 per evaluation, saving a bank's mortgage servicing department paperwork and time, he said.
But that proposal, he said, has struggled to gain traction among larger banks. The Charleston County Legislative Delegation agreed last month to send a letter to top bank executives to encourage banks to consider using the service.