HARRISBURG — The state agency overseeing Pennsylvania’s troubled mortgage relief program has leveled a slew of new accusations against the private contractor originally hired to run it as thousands of homeowners remain stuck in limbo and at risk of further financial harm.

The allegations represent a stark reversal from the Pennsylvania Housing Finance Agency. In January, the agency announced that it would end the contract March 31 and run the program itself, but pointedly avoided saying the company, Innovative Emergency Management, Inc., was at fault.

Spotlight PA reported in January that homeowners seeking help from the program faced waits as long as nine months and poor communication from caseworkers. Some applicants with overdue utility bills had their service shut off while waiting. Others watched their credit scores plummet as they fell months behind on mortgage payments because of the delays.

In a scathing letter dated March 1, PHFA leveled a series of new criticisms at the company, and ended the contract even sooner than planned. The housing agency now says the company failed to deliver what it had promised since the beginning. More recently, IEM prematurely denied assistance to some homeowners in an effort to close applications quickly, PHFA said.

In a 10-page response, a lawyer for IEM called the housing agency’s claims “factually and legally unfounded.” PHFA failed to establish any metrics to evaluate the company’s performance — as required by the contract — and insisted on “excessive” changes to the program, which led to “inevitable inefficiencies and delays,” the response said.

For now, both sides have agreed to a three-month truce while state officials investigate. But the newly uncovered problems have slowed the process of transitioning the program to the state’s control, a PHFA spokesperson said.

Some homeowners have waited for help for more than a year. Others have waited for the chance to apply: Since Feb. 1, the $350 million relief program hasn’t taken new applications in order to resolve the backlog. It’s not clear when, or whether, it will reopen, or how much money will be left once the roughly 16,500 pending applications have been funded.

Administrators previously told Spotlight PA the main cause of the delays was that some mortgage companies were slow to respond with the information needed to process applications. But the program was also plagued by internal problems. Many homeowners said they were left in the dark after IEM caseworkers stopped responding to them. Some said workers failed to tell them crucial information about the program’s rules.

More than seven months after she applied to the relief program, Ashley Rushing still didn’t know whether she would receive anything.

Rushing, who lives with her four sons in Luzerne County, sought help with her ongoing mortgage payments last July. Since then, she has called, texted, and emailed IEM caseworkers trying to get updates, she said.

She contacted her state representative and reached out to the program on Facebook. She even tried faxing a copy of her application to the company, she said. (The program does not accept paper applications.).

December brought a rare hint of progress: A caseworker told her that the program had contacted her mortgage company. But three months later, Rushing was still waiting.

“I feel like I did 90% of the legwork for no results,” she said. “It’s honestly just been a disappointment.”

Under the contract, PHFA handled the program’s policies, while IEM carried out day-to-day administration, including processing applications, contacting mortgage and utility companies, and fielding applicants’ questions.

IEM, which calls itself “the industry leader in disaster recovery,” has a long track record overseeing state and federal aid programs, and was hired to run equivalent mortgage programs in North Carolina, Puerto Rico, and Virginia.

The Pennsylvania contract, signed in October 2021, was supposed to last five years. In its March letter alleging serious problems with the company’s performance, PHFA noted a recent uptick in the number of homeowners denied assistance because IEM caseworkers deemed their mortgage or utility company unresponsive. The increase, which the agency said began after it first moved to end the contract, appears to represent an effort by IEM to close applications “prematurely,” the letter said.

PHFA spokesperson Scott Elliott said in a statement that it was not yet clear how many homeowners were affected and that PHFA would review those cases to ensure that no one was unfairly disqualified.

In the company’s response, a lawyer for IEM didn’t dispute the underlying facts but argued that PHFA mischaracterized what happened. When an applicant’s mortgage or utility company didn’t respond to the program’s inquiries, program workers typically left the case open “as a courtesy to applicants,” the response said. But as part of the handoff, following instructions from PHFA, IEM closed these cases. This “not surprisingly” led to an uptick in appeals, the company said.

PHFA also said it found “data deficiencies” in IEM’s records that would require around 2,000 applications to be manually entered into the new system. In addition, PHFA said it recently learned from mortgage companies that in some cases they provided IEM with information in a timely fashion, but the company failed to follow up.

IEM denied these claims, saying many were too vague to respond to specifically. PHFA made “excessive” policy changes to the program, the company said, which meant workers had to manually enter data for numerous applications.

The company also argued that PHFA has no grounds to say IEM fell short, since the agency failed to establish any objective metrics to evaluate the company’s performance. The contract specifically calls for the parties to develop these measures.

PHFA declined to respond to IEM’s criticisms. As part of the most recent agreement, the agency dropped its claim that IEM had breached the terms of the contract. PHFA had previously ended the contract without saying IEM was at fault.

Both parties want to see the program succeed and aim to “amicably resolve their current dispute via a negotiation and settlement process that hopefully avoids protracted litigation,” Elliott, the PHFA spokesperson, said in a statement.

The agreement says that PHFA can reassert its claims that IEM fell short, depending on the findings of an audit and investigation due to be completed by early June.

The problems that emerged during the transition have created further delays. PHFA originally told Spotlight PA it planned to start processing applications Feb. 13. But by mid-March, the agency was still working to register applicants in the new system.

Rushing learned in late January that PHFA would be taking the program over. Applications like hers would be a priority, the agency promised in an email announcing the change. Since then, she said, it has been easier to get someone on the phone — but all they do is apologize and say they can’t tell her anything yet.

Finally, in late March, Rushing learned from a Spotlight PA reporter that IEM had determined she did not qualify for help with her mortgage payments.

Caseworkers received the information from Rushing’s mortgage company in late February, but the company “was not able to send a determination letter communicating this to the applicant before the contract ended,” said Mandy McIntyre, an IEM spokesperson.

Rushing’s application was delayed because her mortgage company was slow to respond to the program’s inquiries and didn’t sign a formal agreement to participate until December, McIntyre said.

The mortgage company said it is investigating but declined to comment further. PHFA declined to comment on specific applications.

Rushing was disappointed, but not surprised, by the news. At first, she was excited about the program. She encouraged friends to apply too, which she now regrets.

“It was poorly run and it’s such a shame,” she said.

WHILE YOU’RE HERE... If you learned something from this story, pay it forward and become a member of Spotlight PA so someone else can in the future at spotlightpa.org/donate. Spotlight PA is funded by foundations and readers like you who are committed to accountability journalism that gets results.

Spotlight PA is an independent, nonpartisan newsroom powered by The Philadelphia Inquirer in partnership with PennLive/The Patriot-News, TribLIVE/Pittsburgh Tribune-Review, and WITF Public Media.