NEW YORK (CNNMoney.com) -- The jobless may not be getting much help from President Obama's loan modification program, but those in Pennsylvania have another place to turn.
The Pennsylvania Housing Finance Agency offers the jobless and those suffering financial hardship loans of up to $60,000 for as long as three years to cover their monthly payments or take care of their arrears. Created in 1983, the program boasts an 80% success rate in preventing foreclosures.
"If you allow people some time to find a job, they can keep their home, which saves their family, their neighborhood and their communities," said Brian Hudson, the agency's executive director.
The emergency mortgage assistance program, which is funded by the state and borrowers' repayments, has come into the spotlight in recent weeks as the president searches for a way to help the unemployed stay in their homes.
The administration late last month announced a $1.5 billion initiative that gives money to the states hardest hit by the mortgage crisis: Arizona, California, Florida, Michigan and Nevada. The effort calls for the states' housing authorities to assist the jobless and those who are underwater -- meaning they owe far more than their homes are worth.
Already, officials in Nevada, California and Florida have been in touch with Hudson to learn how to replicate Pennsylvania's program, which has distributed $450 million on behalf of 43,000 homeowners since inception. Similar efforts also exist in Delaware, North Carolina and Massachusetts.
Here's how the Pennsylvania program works: Housing counselors send the agency applications of those suffering temporary hardships beyond their control, Hudson said. Those approved could have their arrears wiped out, their monthly mortgage obligation covered, or both.
Hudson attributes the program's success to a careful inspection of applicants' financial backgrounds, which are reviewed annually. Those who've racked up credit cards debts are not likely to gain approval, for instance. Those likely to land a job within a few months or years are.
"You must have a reasonable prospect of resuming full payments within 36 months and of paying the mortgage in full," Hudson said.
Loan payments are made directly to the servicers and a lien is placed on the property. The aid is repaid at a 5.25% interest rate over 10 years on average, though the borrower's financial circumstances are taken into account.
For Erin and Robert Smith, the loan program helped them keep a roof over the heads of their three children. The Harrisburg, Pa. couple had no problem handling the $2,000 monthly payment on their home ... until they lost their jobs in 2008.
Their loan servicer refused to help them, instead sending them a foreclosure notice. But the Pennsylvania agency stepped in, giving them a $30,000 loan to cover their arrears and real estate taxes.
"All we needed was a break," said Erin Smith, 33. "We knew once we found employment, we could start making those payments."
The Smiths are among the 3,250 homeowners that the housing agency's mortgage assistance program saved from foreclosure last year. A record 14,000 homeowners applied for help in 2009, up from 10,000 in most years.
"Not too many mortgage companies say we'll only take a small payment until you get back on your feet," said Linda Harvan, a foreclosure intervention counselor with Action Housing in Pittsburgh.
Such loan programs are not that easy to administer, however. Fannie Mae unveiled a similar program, HomeSaver Advance, in 2008 to help those suffering temporary financial hardships. It provided unsecured loans of up to $15,000 that borrowers could use to clear their arrears.
But the program was effectively discontinued within a year after redefault rates soared to nearly 70%. By August 2009, HomeSaver Advance accounted for only 3% of Fannie Mae's foreclosure prevention actions, down from 42% a year earlier.
Awilda Mercado is thankful that the emergency loan program in Pennsylvania continues to serve the state's residents. In 2008 she lost her factory position and her husband had an on-the-job accident that left him unable to work. To help her stay in her York, Penn., home, the agency took care of her arrears of $7,386 and paid four months of her mortgage.
Now that she's receiving unemployment and her husband is on disability, the Mercados have been able to resume their mortgage payments. They also are reimbursing the housing agency, often sending in more than the $25 minimum payment.
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