A pandemic relief program designed to help homeowners avoid foreclosure has been plagued by monthslong delays, preventing millions of federal dollars from flowing to desperate Vermont families.

Launched in January, the Vermont Homeowner Assistance Program is meant to help people who lost income during the pandemic keep their homes. Homeowners can apply for up to $30,000 in grants to catch up on missed mortgage payments, property taxes and utility bills.

Homeowners have requested a total of $25 million so far. But less than half of that money has been paid out, and about 80 households have been waiting at least six months.

Among that group is Kate Smith, who left a desk job in health care last year because she was pregnant and scared of what could happen to her baby if she were infected with COVID-19.

Down one income, Smith and her husband received permission from their lender, Rocket Mortgage, to enter a forbearance period that would allow them to temporarily pause payments on their Barre home. They paid what little they could during this 18-month period but ultimately fell $16,000 behind.

The Smiths applied for the homeowner assistance program in mid-January and were told that their application would be processed in about 60 days. Their request for $1,500 to cover water and electric payments was quickly approved. But as of last week, their mortgage request was still pending.

The Vermont Housing Finance Agency, a nonprofit lender overseeing the assistance program, blames the delays on the complexities of its task: setting up an entirely new program and communicating with hundreds of different organizations to verify debts.

The $11 million the program has managed to pay out has made a huge difference for those grant recipients, said Maura Collins, VHFA's executive director. "The program is working," she said. "It is just working slower than we anticipated."

Foreclosures fell nationally during the pandemic, thanks to a federal moratorium. But they've ticked back up toward pre-pandemic levels in recent months.

That same trend has held true in Vermont. A Seven Days analysis of court filings shows that lenders filed 347 foreclosure proceedings in the first seven months of this year. That's 100 more than the total from all of 2021, though still below pre-pandemic levels.

Vermont first began offering pandemic-related mortgage assistance in the summer of 2020 using $10 million in federal CARES Act funds. That program, also administered by VHFA, helped more than 900 applicants before it ran out of money last summer. Another round of congressionally approved funding contributed an additional $50 million for the cause.

The funds are part of a wide-ranging effort to keep people in their homes during the public health crisis. A separate program for renters run by the Vermont State Housing Authority has doled out more than $120 million to nearly 14,000 applicants since it launched in April 2021. Paperwork delays contributed to a similarly rocky rollout for that program.

About a fifth of the homeowner assistance money will be spent on administrative costs, including contracts with Vermont Legal Aid to help some applicants, and third-party vendors who are running a call center and online portal available to program participants.

The rest will go to households at or below 150 percent of their area's median income — $160,000 for a family of four in Chittenden County — who experienced pandemic-related financial hardship after January 2020. That can include people who couldn't work because COVID-19 lockdowns shuttered their place of employment, as well as people who had to leave a job to care for a family member. 

Nine hundred households applied within the first three weeks of the program's launch, and 3,600 more have done so since. VHFA expected to run the program for four years but could run out of money much sooner: The $25 million requested to date represents more than half of the available funds.

In speaking with other program administrators around the country, Collins said she's realized that VHFA's initial hope of making payments within two months of receiving an application was "naïve."

"Everyone is finding this is taking longer than they wanted," she said.

Much of the holdup is related to one seemingly straightforward task: verifying the applicant's debt. That process can drag out for months as VHFA staffers struggle to get responses from national mortgage lenders. 

Collins receives a report each week showing the longest outstanding applications and said she routinely questions her staff about the lack of progress. The answers are always reasonable, she said, and can be something simple, such as not finding the right contact at a mortgage service company "because it's a big behemoth with different departments that don't talk to each other."

But it's not just big companies that aren't returning calls. For past-due property taxes and utility payments, staffers sometimes have to contact remote Vermont towns or mom-and-pop fuel companies. Forty-four Vermont towns that are owed back taxes haven't responded to VHFA's requests, holding up 85 applications. One staffer now works full time to track down officials in those towns.

These bureaucratic hurdles, while annoying at times, act as a safeguard against overpayments or fraud, Collins said. VHFA's attempts to verify debts show that the agency is "doing due diligence with these public funds," she said. "It is going to help us know that we've run a good program."

That's cold comfort to those ensnared in a knot of red tape, especially when most are unaware of these behind-the-scenes machinations. The online portal that applicants access offers only confirmation that applications are "under review." Workers at the third-party call center rarely have more insight. 

Grace Pazdan, an attorney with Vermont Legal Aid, said VHFA could do more to communicate with frustrated homeowners. But even when homeowners know what's causing the delays, there's little they can do to move the process along.

Candy Lyle's family fell behind on their mortgage payments after her husband lost his job due to COVID-19-related layoffs. They've been waiting since April to hear back on their application for $16,000 in assistance. She's been calling both her lender and the assistance program multiple times a week to ask about the delay but has had little luck. "They'll say one thing, and then our mortgage company will say another thing," Lyle said.

Meanwhile, their forbearance period ended last month, and their lender has warned that it may take legal action soon. "We're just waiting for everybody to make their decision," she said.

The delays shouldn't cause anyone to lose their homes — at least theoretically. 

Homeowners with federally backed loans who apply for the assistance program are protected from foreclosures for up to 60 days. Vermont courts have enacted a similar protection for those without federally backed loans. Mortgage lenders seeking foreclosures must now notify homeowners about the assistance program and their right to request a postponement if they apply. 

Yet legal advocates worry that some people might slip through the cracks. Few, if any, applications are processed within 60 days, Pazdan said, and neither the state nor federal protections automatically extend that window. Homeowners must instead petition the court. 

Vermont Legal Aid attorneys are helping about 175 households navigate this system and expect that all should be able to stave off foreclosure long enough to get the assistance. As for the hundreds of households they aren't representing, Pazdan said, "We just don't know."

Some homeowners have been forced to make difficult decisions as they wait for a lifeline.

When Smith, the Barre homeowner, learned that her forbearance period expired in June, Rocket Mortgage gave her a few options to avoid a foreclosure, she said. The first was to pay off the $16,000 debt in full, which she couldn't afford. Another was to slap the past-due balance onto the end of the loan — and lose eligibility for the grant program.

The third option was more appealing. She could enter a loan modification program that would tack on an extra 25 years to her 15-year mortgage, lowering her monthly payments but adding thousands of dollars in interest over the life of the loan. 

The modification program included a three-month trial period, during which Smith could revert back to her original loan at any time. Her hope, she said, was that the grant money would arrive before the trial period expired. 

After confirming with Rocket Mortgage that it would not jeopardize her eligibility for the grant, she signed up for a loan modification and crossed her fingers.

Smith's problems seemed to be over in early July, when the status of her application changed to "paid." But when she checked the online portal a couple of weeks later, it said her request was "on hold." 

She couldn't believe it. She contacted the call center, where a puzzled staffer vowed to call her back. Numerous other calls ended the same way. "Every phone call, no answers," Smith said.

Late last month, with the help of a Legal Aid attorney, Smith finally learned what had happened. When the assistance program contacted Rocket Mortgage to confirm her debt, the lender said she was no longer eligible because she had entered the loan modification program — despite its earlier assurances. 

Smith found herself stuck in a catch-22: To reclaim her eligibility for the grant, she was told she had to leave her lender's modification program — the only thing protecting her from a foreclosure. That wouldn't have been a problem if she could rely on the program to quickly send the money. But further delays could have opened her up to legal action, she said, a risk she was no longer willing to take.

The Smiths ultimately decided that, barring a better resolution, they would add the debt onto their loan and give up on the grant program.

"I have babies here. This is where I brought my kids home. This is our life," Smith said, fighting back tears. "I can't risk all that on some paperwork."

On Tuesday, Smith finally received some good news. Her grant had finally been approved. It should arrive next week.