Housing Finance Agency Innovation Fund for the Hardest Hit Housing Markets 

(“HHF”)

Guidelines for HFA Proposal Submission for Unemployment Programs 

STATEMENT OF PURPOSE 

On August 11, 2010, the Administration announced an expansion of the HHF to provide 

additional assistance targeted at unemployed borrowers in states with the highest unemployment 

rates. This expansion of the HHF will include up to $2 billion in funding for HFAs to offer a 

standard unemployment bridge program that will pay a portion of a borrower’s mortgage 

payment while they are unemployed or underemployed. 

Responsible families across the country have found themselves unable to pay their mortgages 

due to unemployment or underemployment. The economic downtown has led to a record 

number of workers suffering from long term unemployment, and millions more are working parttime because they cannot find full time or otherwise adequate work. This assistance is designed 

to help thousands of families keep making their payments and stay in their homes until they can 

they find work. 

The 18 states and jurisdictions eligible for this additional funding had high sustained 

unemployment rates over the last 12 months (through June, 2010) that were at or above the 

national average. This includes nine of the original HHF states (California, Florida, Michigan, 

Nevada, North Carolina, Ohio, Oregon, Rhode Island and South Carolina), who can use the 

funding for an existing unemployment bridge program or implement the model provided, as well 

as Alabama, the District of Columbia, Georgia, Illinois, Indiana, Kentucky, Mississippi, New 

Jersey and Tennessee. State Housing Finance Agencies (“HFAs”) that are currently in the HHF 

will not be required to submit a new HFA Proposal, but may amend their existing documents to 

incorporate the additional funding and submit a term sheet that reflects the new or modified 

program. Existing HHF states should also submit an action plan that details how this funding 

will be incorporated with previous funding, revised estimates of the people served, an updated 

administrative expenses template and revised timeline, if applicable. HFAs that are not currently 

in the HHF must submit proposals (an “HFA Proposal”) that will describe how they will 

implement this unemployment bridge program (“Program”). If an HFA is not able to complete 

all of the requirements in time prior to the deadline established by Treasury, the state will not be 

able to receive the funding.1

                                                           

1 The deadline, which will be communicated to the HFAs shortly, will be in late September because the purchase 

authority granted to Treasury pursuant to Section 101(a) of the Emergency Economic Stabilization Act of 2008, as 

amended (“EESA”) terminates on October 3, 2010.

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To receive funding from the HHF, a Program must satisfy the requirements for funding under 

EESA. These requirements include that the recipient of funds must be a financial institution 

eligible for receipt of funds under EESA, and that the funds must be used to pay for Programs 

designed to provide credit enhancements to facilitate mortgage modifications in order to prevent 

avoidable foreclosures and other permitted uses under EESA. For this funding, HFAs must 

create and implement a single unemployment bridge program that pays some portion of an 

unemployed borrower’s mortgage while they search for work. All assistance must be structured 

as a non-recourse loan, secured by a junior lien in the property, which will be forgivable over a 

period of time not to exceed 10 years. This loan will only be repayable if the borrower sells or 

refinances the property before the period expires and there are sufficient equity proceeds from 

the sale to pay the portion of the loan that has not yet been forgiven. All funds returned to the 

eligible entity may be reused for this program or, with approval of Treasury, another of the 

state’s HHF programs until December 31, 2017. Thereafter they will be returned to Treasury. 

ALLOWABLE USES 

This additional funding for the HHF is designed to provide targeted relief to unemployed or 

underemployed borrowers, while allowing HFAs to retain the flexibility to tailor the assistance to 

the needs of each participating state. These Programs will pay some portion of a borrower’s 

mortgage payment for a period of time to be determined by the HFA to allow a borrower to 

secure employment or obtain job training. The HFA should obtain documentation of 

unemployment or employment-related loss of income from all participating borrowers. The 

HFA can determine whether and how much a payment is required by the borrower, as well as 

how this payment will be collected. It is strongly recommended that the HFA (or its agent) 

collect the borrower’s contribution first and then submit a whole payment to the servicer to ease 

implementation issues. The HFAs may determine the eligibility criteria to use for this Program 

to better ensure that this assistance has the maximum local impact and leads to sustained 

homeownership. For instance, HFAs could require borrowers to have been current on the loan 

before the hardship occurred or could target certain occupational groups that are more likely to 

be reemployed. The HFA can also set loan characteristics they would like to target or believe 

are more likely to have sustained homeownership (e.g. loan-to-value ratio below 125%, unpaid 

principal balance less than $350,000). EESA does not require an investor match for this 

program, but states can seek a contribution from investors if it is appropriate for their Program 

and they can obtain servicer participation with such a contribution. 

The target population should be limited to residences with unpaid principal balances equal to or 

less than the current GSE conforming limit of $729,7502

. HFAs may target low and moderate 

income borrowers at their discretion consistent with that HFA’s state enabling legislation. All 

borrowers must submit a hardship affidavit to receive assistance. 

Each Program must be in full compliance with, all federal, state, and local laws, including, but 

not limited to, the Equal Credit Opportunity Act and the Fair Housing Act, which prohibit 

discrimination on a prohibited basis in connection with mortgage transactions. These Programs 

are subject to the fair lending laws and HFAs should ensure that the Programs do not treat a 

                                                           

2

 Maximum loan limit for one unit dwelling. 2 units = $934,200; 3 units = $1,129,250; 4 units = $1,404,400.

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borrower less favorably than other borrowers on grounds such as race, religion, national origin, 

sex, marital or familial status, age, ability, or receipt of public assistance income in connection 

with any Program. 

ELIGIBLE ENTITY 

The HHF has been designated specifically for implementation by state HFAs. To receive funds, 

each recipient of funding from the HHF (each, an “Eligible Entity”) must be a “financial 

institution,” as that term is defined in EESA. Specifically, Section 3(5) of EESA defines 

“financial institution” as: 

“FINANCIAL INSTITUTION.—The term ‘‘financial institution” means any institution, 

including but not limited to a bank, savings association, credit union, security broker or 

dealer, or insurance company, established and regulated under the laws of the United 

States or any State, territory, or possession of the United States, the District of Columbia, 

Commonwealth of Puerto Rico, Commonwealth of Northern Mariana Islands, Guam, 

American Samoa, or the United States Virgin Islands, and having significant operations 

in the United States, but excluding any central bank of, or institution owned by, a foreign 

government.” 

Accordingly, an Eligible Entity must be a regulated entity that is incorporated separately from 

the state government itself, such as a corporation (private or public) or similar entity formed or 

incorporated under state law, which has the corporate power to receive funds from Treasury in 

respect of the HHF and to work with the related state HFA in implementing that state’s HFA 

Proposal. Agencies of state governments are not considered Eligible Entities for purposes of the 

HHF unless they separately satisfy the criteria discussed above. The Eligible Entity may be an 

existing entity or it may be newly-formed for the purpose of implementing the HHF. Prior to 

receiving funds through the HHF, each Eligible Entity will need to be approved as a “financial 

institution” under EESA by Treasury in its sole discretion. Additionally, Eligible Entities will be 

required to enter into an agreement (“Participation Agreement”) with Treasury as well as a 

Financial Instrument, which must qualify as a “financial instrument” under EESA. The 

Participation Agreement will include, among other provisions, reporting and compliance 

requirements as more fully described below under “Reporting” and “Compliance and 

Monitoring.” All new states in the HHF should submit the articles of incorporation and 

bylaws for their Eligible Entity with this proposal. If the Eligible Entity is to be newly 

formed, please submit these items in draft form. 

HFA PROPOSAL REQUIREMENTS 

The HFAs should provide a detailed business plan for this Program as well as a term sheet in the 

form of and that addresses the matters contained in Exhibit A attached to these guidelines. Each 

business plan should include the following sections. Throughout the life of the HHF, Eligible 

Entities will be able to modify this Program based on Program performance so long as it still 

complies with these guidelines, the Participation Agreement and subject to review and approval 

by Treasury in its sole discretion. The HFA Proposal should be organized into the following 

sections: 

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a. Overview of Program – The HFA should provide detailed information about the proposed 

Program and its goals, relevant background on unemployment in the state and how this 

Program will specifically address the unique needs of the state. It should include the 

elements of the program that will be tailored: the length of assistance, the amount or cap on 

assistance and any other relevant details. In addition, the HFA should provide a timeline in 

which it expects the Eligible Entity to deploy the funds. It should describe any process used 

to obtain feedback from state stakeholders. The HFA should identify any anticipated 

Program implementation obstacles and provide a related mitigation plan. The HFA should 

describe how funds from Treasury will be leveraged by additional resources, if applicable 

(e.g., interaction with existing programs at the state or federal level). 

b. Population served and allocation methodology – The HFA should provide detailed 

information about the estimated number of households that the Program will target, including 

a geographic breakdown or other targeting, if applicable. The HFA Proposal should detail 

eligibility criteria, including any populations that are excluded (e.g. borrower whose current 

mortgage payment is below 31% or have a loan-to-value of greater than 125%). 

c. Demonstration of capacity to implement – The HFA should provide background 

information on its organizational capacity to implement the Program, including the 

experiences of key staff members, necessary compliance infrastructure, audit and internal 

controls, fraud risk mitigation, reporting protocols, systems infrastructure and necessary 

funding and implementation mechanisms. If the HFA has implemented or sponsored a 

similar or identical program in the past, the HFA should provide metrics regarding efficacy, 

where possible. 

d. Staffing and business partners – The HFA should provide a detailed staffing plan for the 

Program, including the use of outside partnership organizations, if applicable. The HFA 

should explain how the Eligible Entity will be managed (and / or staffed) by the HFA. The 

HFA should list any key partners that will be part of the Program and detail their roles, 

expertise and relationship to the HFA and expected level of compensation. The HFA should 

detail any agreements or other outside business relationships related to the Program. If the 

Program will entail the use of housing counselors for intake and/or other functions necessary 

and incidental to the Program, this should be described in detail as well. 

e. Administrative expenses – The HFA should include an estimate of administrative expenses 

(including expenses associated with staffing and business partners from paragraph e above) 

required to implement the Program, including a detailed expenditure timeline. See Exhibit B. 

f. Overview of risk management / fraud prevention – The HFA should provide a plan for 

minimizing Program and fraud risk, including details related to monitoring and auditing. The 

HFA should incorporate such risk management and fraud prevention strategies into the 

overall compliance plan (see Compliance and Monitoring below). 

REPORTING 

HFAs will be required to develop and maintain operational and performance metrics, have a 

detailed financial reporting system, and track homeowners helped through its Program. HFAs 

will report data to Treasury on a periodic basis, including metrics used to measure Program 

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effectiveness against stated objectives. Treasury will provide a list of metrics that have to be 

reported to Treasury on a regular basis. Treasury may request that the HFA modify the proposed 

performance measures or seek additional metrics as necessary. Treasury may make any or all 

data reported by an HFA available to the public. States are encouraged to use outside 

researchers to evaluate the long-term effectiveness of the program. 

COMPLIANCE AND MONITORING 

HFA’s and Eligible Entities will be required to comply with all requirements under EESA, 

including but not limited to, allowing full compliance and oversight by Treasury, the 

Comptroller General of the United States, Government Accountability Office, Congressional 

Oversight Panel, and the Special Inspector General of the Troubled Asset Relief Program as to 

the application of any EESA funds. All books, communications and records regarding the use of 

EESA funds must be available for review by any of these entities upon request. 

In addition, HFAs will be required to design a Program, establish monitoring mechanisms, and 

implement a system of internal controls which minimize the risk of fraud, mitigate conflicts of 

interest, and maximize operational efficiency and effectiveness. A system of internal controls 

should encompass the entities’ processes, their business partnerships and relationships and any 

constituency being aided through this Program. The entities will be required to test, certify, and 

provide an independent verification of the effectiveness of these controls at least annually 

including an assessment prior to program launch to ensure Eligible Entities have taken 

appropriate steps to meet program objectives, as well as to provide audited financial statements 

to Treasury. 

ADMINISTRATIVE EXPENSES 

Eligible Entities will be eligible to receive funds for administrative expenses necessary to 

achieve the Program goals and as approved by Treasury. Please fill out the template provided in 

Exhibit B.

INSTRUCTIONS FOR SUBMITTING HFA PROPOSALS 

Deadline

HFA Proposals and action plans must be received no later than by 5:00 p.m. EST on September 

1, 2010 (Treasury will confirm receipt). 

Format

Each HFA Proposal must include a one-page cover letter that provides: (i) the name, title, 

mailing address, e-mail address, and office and mobile phone numbers of the individual 

designated to receive communications from Treasury; and (ii) a certification statement that the 

HFA: (a) understands and agrees to the terms set forth in these guidelines; and (b) understands 

and agrees to the confidentiality provisions below. 

HFA Proposals may not exceed 30, one-sided pages, prepared in 12-point, Times Roman font 

with 1 inch margins. HFA Proposals must not include other documents or attachments including 

but not limited to generic marketing or sales information unless directly related to the ability of 

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the HFA to execute the proposed plan(s). HFA Proposals must not rely on cross-references to 

other documents or websites. 

Delivery

Each HFA Proposal must be submitted via email in PDF format to 

HFAInnovation@do.treas.gov. Also, please submit a word version of the term sheet for your 

Program. 

Treasury Review

HFA Proposals will be reviewed by an interdisciplinary committee within Treasury. The 

primary purpose of the review is to confirm that HFA Proposals adhere to the requirements of 

EESA and these guidelines. Treasury may contact the HFA with questions as part of its review 

and may require the HFA to submit additional information. Treasury will notify the HFA 

designated individual once the Proposal is approved. 

Communication with Treasury 

HFAs are responsible for and encouraged to seek clarification on any aspect of these guidelines 

that they do not fully understand. All questions should be directed to:

HFAInnovation@do.treas.gov. 

Treasury, in its sole discretion, may respond orally or in writing to any question(s) submitted by 

an HFA or about an HFA’s Proposal. Substantive questions should be submitted as soon as 

possible. No information gained from any communication may be considered in any way binding 

or limiting on Treasury. 

Treasury considers any information provided to an HFA in evaluating its HFA Proposal to be 

strictly confidential and must not disclose any communication from Treasury to any party 

outside the HFA’s organization, nor may correspondence from Treasury be duplicated, used or 

disclosed in whole or in part for any purpose other than to prepare an HFA Proposal, without the 

express prior written consent of Treasury. 

Other Terms and Conditions

Treasury assumes no obligation to reimburse or otherwise compensate the HFA or the Eligible 

Entity for expenses or losses incurred in connection with these guidelines, other than as 

specifically detailed in the Participation Agreement. 

Treasury reserves the right to: (i) modify the requirements in these guidelines or withdraw these 

guidelines at any time; (ii) negotiate with each HFA and confirm any HFA Proposal considered 

acceptable in part or in total; (iii) request, orally or in writing, clarification of or additional 

information on an HFA Proposal; (iv) waive minor informalities or irregularities, or any 

requirement of these guidelines; and (v) reject an HFA Proposal that does not conform to the 

requirements of these guidelines.