Last week, two Ohio government agencies submitted to the U.S. Treasury the state’s proposal to spend its Hardest Hit Fund of $172 million. The 46-page document is well-researched and carefully thought out. Most importantly, it ensures wise, sustained and maximized spending of this important chunk of change by leveraging Ohio’s ready-made network of foreclosure prevention counseling to the fullest and requiring all homeowners who apply for Ohio’s HHF programs to do so through certified counselors. Final approval by Treasury is four to six weeks away.

Over the course of three years, the Ohio Housing Finance Agency and Department of Commerce (See a copy of the full proposal here) hope to help about 18,000 homeowners, 85 percent of whom will reside in “target” counties — approximately 50 counties determined by internal OHFA research to have the highest share of foreclosure filings, highest percent change in home sales and highest unemployment rates.

What is the most music to our ears, however, is how tightly OHFA and Commerce have tied counseling to programs and funding. It is clear that officials understood how best, in their words, to “optimize the potential” of Ohio’s HHF. It bears repeating: Foreclosure prevention counseling works. Homeowners in counseling are 60 percent MORE LIKELY to save their homes than those who navigate the process alone. 

So Ohio’s proposal says that homeowners can only access HHF programs through HUD-approved housing counseling agencies. And there’s money behind that — a total of $13 million, with some dollars up front to help them get up and running (a request made to Treasury and won by Ohio Rep. Dennis Kucinich). After that, agencies will get $700 per homeowner helped.

What OHFA and Commerce are saying with this is that foreclosure is a symptom — not cause — of larger financial ills in homeowners’ lives. Counselors are positioned to get a holistic view and provide multi-faceted fixes. On pg. 13, the proposal’s authors note:

Homeowners who participated in housing counseling and who participated in additional education such as financial education, consumer credit counseling, and job training were better candidates for programs like loan modification, principal reduction, and partial mortgage payment assistance. This is primarily because a homeowner’s voluntary participation shows motivation, makes the homeowner better prepared during negotiation, and likely lowers redefault rates by increasing a homeowner’s potential for sustaining the loan payments.

A “Homeowner Action Plan” under HHF, for example, will allow counselors to do more than address just foreclosure and refer borrowers to job training, financial education, credit counseling, tax credits, legal assistance and any bevy of other social services that will allow them to use HHF funds towards a sustainable, affordable mortgage solution.

This approach also takes into account the multiple prongs of the foreclosure crisis: 14 consecutive years of record foreclosure filings, high rates of unemployment and underemployment, a weak housing market, declining home values and one out of every five Ohio homeowners underwater.

The Ohio HHF will fund four main programs: 1) Partial Mortgage Payment Assistance, 2) Rescue Payment Assistance, 3) Modification Assistance with Possible Principal Reduction and 4)Transitional Assistance. In every case except the last, all funding would be made in the form of a 10-year, low- or no-interest loan to the homeowner.

Some notes and background from OHFA:

Ohio will receive the third largest allocation of Hardest-Hit funds to date as part of Treasury’s second round of funding. The first round, announced February 19, 2010, went to states with home price declines of more than 20 percent. The second round of funding will be distributed to states with the highest share of their population living in counties in which the unemployment rate exceeded 12 percent in 2009.

Please note the strategies outlined in Ohio’s proposal are not final. Once the U.S. Department of Treasury reviews the proposal and ensures that program guidelines are met, OHFA will receive $172 million dollars in new federal funding designed to help homeowners through this program.