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Tennessee homeowners who have fallen behind on their mortgages, property taxes or home insurance due to the COVID-19 pandemic are getting a new economic lifeline this week.

The Tennessee Housing Development Agency is launching a new federally-funded program Monday that will pay up to $40,000 for each household that has suffered from the ongoing pandemic and is delinquent in housing-related bills.

The American Rescue Plan, the stimulus relief package adopted by Congressional Democrats in March to help mitigate the economic hardships from COVID-19, is providing the state housing agency $168 million to aid Tennessee homeowners hurt by the pandemic. Nationwide, Congress allocated nearly $10 billion to aid homeowners hurt by the pandemic to help limit foreclosures, bankruptcies and unpaid debts and taxes.

(READ MORE: States and cities slow to spend federal pandemic money)

"We think this funding will go a long way in helping homeowners in Tennessee who haven't been able to make their mortgage payments through no fault of their own," the state housing agency's executive director, Ralph M. Perrey, said in a telephone interview. "We have many folks who were good mortgage holders and payers until COVID-19 caused them to lose their job, have their hours cut or forced them to cope with family illnesses, deaths and quarantines. This program is designed to help make these homeowners whole again because they fell behind for reasons not of their own making."

Qualified recipients may receive up to $40,000 each to pay for past-due mortgage payments, property taxes, insurance premiums, homeowners' association fees and other specified housing costs.

Tennessee is one of the first states to launch its homeowner assistance program, but other states are preparing similar relief efforts. The stimulus plan allocates $354.2 million for Georgia and $125.7 million for Alabama from the federally funded Home Assistance Fund program, according to the U.S. Department of Treasury.

According to 2021 figures from CoreLogic, 3.3% of Tennessee mortgage holders are delinquent more than 90 days on their mortgage payments. Perrey said that is nearly double the pre-pandemic mortgage delinquency rate.

In Hamilton County, 2.69% of mortgage holders are more than 90 days delinquent, while in Bradley County 3.14% were delinquent, according to CoreLogic. Delinquency rates for other counties in the region include Rhea at 3.78%, Bledsoe at 3.67%, Marion at 3.29%, Meigs at 3.23% and Sequatchie at 2.32%.

(READ MORE: Chattanooga, Hamilton County could see $25 million for sewer needs under state plan)

Despite the rise in delinquencies, property foreclosures and bankruptcies have remained limited during most of the pandemic under federal regulations, relief programs and market trends.

Lower interest rates and rising home values combined to create a surge in mortgage refinancing volume last year. Until the summer, delinquent mortgage holders also were protected from eviction through a foreclosure moratorium on federally backed loans. Since the moratorium was lifted last year, the prospect of the additional relief coming from the home assistance program also has discouraged many lenders from initiating the costly foreclosure process, recognizing that they may be paid for unpaid debts from the new federal program.

Homeowners who live in Tennessee, have a household income less than $119,850 and have experienced financial hardship after Jan. 21, 2020, related to the COVID-19 health crisis may begin applying for assistance on Monday on the state website at thda.org/HAF or at any of the 28 participating lenders across the state, including local offices of First Horizon Bank, Pinnacle Financial Corp., Bancorp South, Bank of America and Trustmark Mortgage.

(READ MORE: Chattanooga wants to use federal COVID funds to build emergency homeless shelter)

Qualifying hardships to receive the aid include unemployment, underemployment (loss of income), death of an occupying spouse or co-borrower or an increase in certain expenses directly related to COVID-19.

Contact Dave Flessner at dflessner@timesfreepress.com or at 423-757-6340.

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