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 Frequently Asked Questions (FAQ): Fifth Round Funding Allocation, Hardest Hit Fund (HHF)

1.      What is the Hardest Hit Fund?
The Department of the Treasury (Treasury) established the Housing Finance Agency Innovation Fund for Hardest Hit Housing Markets (Hardest Hit Fund or HHF) in 2010, to provide assistance to states that were most severely impacted by the foreclosure crisis.  Under the Hardest Hit Fund, Treasury provides Troubled Asset Relief Program (TARP) funds to state housing finance agencies in 18 states and the District of Columbia (HHF states), for use in preventing foreclosures and stabilizing state housing markets. As of the end of the third quarter of 2015, HHF has assisted nearly a quarter of a million homeowners and helped to remove more than 7,000 blighted properties in participating jurisdictions.
2.      Why is Treasury making additional investments in HHF now, and how is it able to do so?

While state unemployment rates and home prices have generally improved, many homeowners and neighborhoods continue to face obstacles. Recognizing the current and persistent need among HHF states, Congress recently included a provision in the Consolidated Appropriations Act, 2016 (the Act) that authorizes Treasury to obligate no more than $2 billion in additional TARP funds for existing HHF states.

Our announcement makes clear that we intend to exercise this authority and obligate the entire $2 billion (referred to as the Fifth Round Funding). The additional investment in HHF will enable participating states to continue assisting struggling homeowners and stabilizing housing markets in many of the nation’s hardest hit states.  
3.      How much will each state receive?
Treasury will allocate the $2 billion allowed by law using a two-phase process. The first phase (referred to as Phase 1) will allocate $1 billion among states using a formula based on each state’s population and utilization of prior HHF funds. In order to qualify for Phase 1, states must have drawn at least 50 percent of their current HHF funding. The second phase (referred to as Phase 2) will allocate $1 billion based on an application process that considers the state’s current housing market needs and ability to effectively utilize additional funds.  States will then have until December 31, 2020 to utilize all HHF funds, an extension from the current program end date of December 31, 2017. 
Fifth Round Funding Formula State Allocations[1]
 $    28,282,519
 $    19,340,040
 $  213,489,977
 $    78,016,445
 $      4,924,602
 $    69,231,301
 $    77,896,538
 $      8,885,641
 $    30,880,575
 $    97,590,720
 $  118,174,500
 $    36,425,456
 $    28,565,323
 $    9,680,817
 $    30,148,245
 $    22,030,274
 $    74,491,816
 $    51,945,211
4.      What is Treasury’s rationale for conducting a two-phase process?  Why not allocate the entire $2 billion up front?
Treasury considered a number of factors when determining how to allocate the funds.  The process Treasury announced seeks to balance a number of objectives, including consideration of states’ current housing market needs, allocating funds in a timely manner, providing for a transparent process, and encouraging an effective use of additional funds.  Utilizing a formula in Phase 1 will allow Treasury to allocate funds expeditiously, which is critical, as some states have used or committed nearly all HHF funding to date.  Delays in access to additional funding could slow or suspend HHF programs that are working effectively.  The application process used in Phase 2 will allow Treasury to allocate additional funds based on each state’s specific needs and plans for use of those funds.

5.      What economic statistics or other data did Treasury use in formulating the initial $1 billion formula phase?

The formula is based on publicly available data including state population from the U.S. Census Bureau[2] and the percentage of HHF funds each state has utilized[3]. The use of state population is consistent with previous rounds of HHF funding.  It also recognizes that states’ housing market needs generally scale with the size of their populations.  Utilization of HHF funding reflects the state’s ability to put HHF funds to use in their communities.
6.      When will Treasury allocate funding to states under Phase 1(the formula phase)?
Treasury announced the allocations for each state under Phase 1 on February 19, 2016.  Each state must confirm that they intend to accept some or all of the formula-based allocation by March 4, 2016.  Access to additional HHF funding is contingent on the execution of amendments to the state’s existing contract with Treasury.  We expect this process to be completed by this summer.  The final Phase 1 allocations will be available at 
7.      What is the deadline for states to apply for Phase 2?
States will have until March 11, 2016 to apply for Phase 2. Treasury will review these applications expeditiously and announce final decisions by the end of April.
8.      How will Treasury evaluate each state’s application under Phase 2?
Phase 2 is open to all participating HHF states.  States may request up to 50 percent of their existing HHF funding or $250 million (whichever is lower) and will need to demonstrate both a need for additional funds for foreclosure prevention and state housing market stabilization activities, and an ability to utilize those HHF funds effectively.  

9.      What if states are unable to use new funds by the program’s new end date? 
HHF funds allocated under the Fifth Round Funding will be subject to a “use-or-lose” provision, which will periodically redirect allocated but unused funds to states with higher utilization rates.  HHF states will have to meet annual utilization thresholds beginning at the end of 2016 in order to retain their full Fifth Round funding (Phase 1 and/or Phase 2). 
10.  How will states be able to use the new funds?
States design and administer their programs under the Hardest Hit Fund pursuant to contracts with Treasury.  Use of HHF funds allocated under the Fifth Round Funding will be subject to the same criteria as other HHF funding.  In general, funds are to be used to support locally-tailored programs designed to prevent foreclosure and stabilize state housing markets. 

[1] As of February 15, 2016, Alabama has drawn approximately 29% of its existing HHF allocation.  Since this is less than the 50% required for participation in the formula, Alabama is not reflected in this chart.
[3] Treasury reports the percentage of funds drawn down by each HHF state in its Monthly Report to Congress on the Troubled Asset Relief Program (TARP).  These reports are available at:
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