Homeowners who have had sharp declines in income and are struggling to pay mortgages would benefit from the program. The commissioners are scheduled to consider the letter and a resolution at their June 9 meeting.

The Jackson County Board of Commissioners plans to formally object to a proposal that could shift federal mortgage aid from financially strapped counties in Southern Oregon to more populous counties in the north.

A letter drafted by Commissioner C.W. Smith challenges a change made by the Oregon Housing and Community Services that would expand the program from 16 to 20 counties and dilute the amount given to the more rural counties.

"We could potentially lose hundreds of thousands of dollars or even millions," said Commissioner Dave Gilmour.

"There is a great danger they are going to be sucking all the money up north. The counties that have the most need will get less."

The federal program will provide $88 million for Oregon counties that have high unemployment and high foreclosure rates. Homeowners who have had sharp declines in income and are struggling to pay mortgages would benefit from the program.

The commissioners are scheduled to consider the letter and a resolution at their June 9 meeting.

Rick Crager, deputy director of Oregon Housing and Community Services, said there was no political maneuvering to place Multnomah County on the list.

"There is always the concern about Multnomah sucking up all the resources," he said.

In fact, he said, Multnomah County officials complained his department's proposal would benefit rural areas of the state excessively because they have lower median incomes than the Portland area, Crager said. The lower the median income the better the chance of qualifying for the program, he said.

He said Deschutes and Jackson counties, two of the three counties hardest hit by the economic downturn, would share $10 million to address a large number of homes where the values are less than loan amounts.

"We're trying to work with investors for homeowners who are deeply underwater with their loans," Crager said.

The money is an extension of the "Hardest Hit Fund" announced by President Obama earlier this year. The first round of funding targeted five states in which home prices had declined more than 20 percent. This second round targets five states — North Carolina, Ohio, Oregon, Rhode Island and South Carolina — that had numerous counties in which the unemployment rate topped 12 percent in 2009. Jackson County had a 13 percent unemployment rate while Josephine County hit 14 percent.

States must have their plans for disbursing the funds approved by the Treasury by October 2010. The program could start helping people by late summer or early fall.

Commissioner Smith said the Oregon proposal tries to modify the original intent of the program by expanding it to include four more populous northern counties that didn't hit the 12 percent unemployment mark, effectively tripling the population that could benefit from the federal money. In addition to the Multnomah Count addition, Yamhill, Marion and Clackamas counties were added to the list.

"I'm sure we will get cut out somehow by Portland," he said.

He said Southern Oregon often doesn't get its fair share of federal money because of political pressure from the larger counties.

Commissioner Jack Walker said he objected to federal bailouts in general, and the lack of reliance on business to pull the country out of the recession.

"There has got to be a better answer than the federal government always being the answer," he said.

Crager said the state program developed its criteria for determining which counties would get help based on the unemployment rate, the rate of change in the unemployment rate over a two-year period, the decrease in home values and the number of foreclosures and delinquencies.

Crager said the criteria were developed after his department toured the state, holding hearings in different areas to determine what local residents thought were important factors.

Based on these criteria, Deschutes County was rated the most economically distressed, followed by Crook and Jackson counties. Jefferson, Josephine, Klamath, Yamhill, Columbia and Douglas counties were also high on the list, Crager said.

Multnomah County barely made the list, he said.

Even with $88 million, the state will have a difficult time dealing with the economic crisis.

"It's a multi-billion dollar problem in the state," Crager said. "This will be a drop in the bucket."

The Oregon Housing and Community Services Department has proposed to the federal government that 80 percent of the $88 million go to the 20 counties, with the remaining 20 percent to the rest of the state.

Grants Pass Mayor Mike Murphy has been leading the opposition to the inclusion of Multnomah and the other three counties in the program.

"We know we are seriously outgunned, and we don't have any expectations," Murphy said. "But we know it's wrong."

Reach Mail Tribune reporter Damian Mann at 541-776-4476 or dmann@mailtribune.com.