If you are a Californian and you are having difficulties with your mortgage, you may be in luck. Starting November 1 a new program entitled Keep Your Home will go into effect. The program offers principal reductions (essentially loan modifications), money for “catching up” with your payments, payment subsidies and money for relocation assistance if those are not possible, but you will have to meet the criteria to be eligible for this program.
Eligibility/Types of Assistance
* Payment Subsidy: You must be in “imminent danger” of foreclosure, due to job loss, short-term financial troubles or illness. These homeowners can obtain up to $1500 or 50% of the value of their monthly mortgage payment, whichever is less, for up to six months.
* Mortgage Reinstatement: If you have missed one or more mortgage payments you may be eligible to obtain up to $15,000 or 50% of the delinquent amount, whichever is less, in order to reinstate your mortgage and avoid foreclosure. Caveat: in order for this option to work your lender MUST agree to match the monetary assistance dollar-for-dollar. That means that if you are eligible for the entire $15,000 your lender must agree to reduce your mortgage by $15,000. In essence it is similar to a modification and is a great way to prevent foreclosure, but it remains to be seen whether lenders will follow through.
* Negative Equity Reduction: If you are upside down (owe more than your home is worth in the current market) you may be eligible to receive up to $50,000 towards reduction of the principal balance on your mortgage, to bring it closer to the market comparables and avoid foreclosure. Caveat: Here the lender must also agree to match this number, meaning it will reduce the principal balance of your mortgage by the same amount.
* Must move: For those homeowners who cannot afford to remain in their homes there is still hope. If you agree to work with your lender on a short sale or deed in lieu of foreclosure, you may be eligible to receive up to $5,000 in order to help ease your move to another residence that you can afford. The money is paid through your loan service provider and is granted on a one-time only basis.
–Home must be in California
–Home is your principal place of residence (no vacation homes)
–Income restrictions must be met
–Homeowner must sign an affidavit stating that your income will allow you to make modified payments on your mortgage, that you are behind on payments or in danger of imminent default, etc.
–The property cannot be vacant, abandoned or in need of major repair
–You must not have taken cash out of your home in a cash out refinance
The state has allocated $700 million toward this program (where this money comes from in a state that is in financial trouble I haven’t a clue, but regardless the money is there). All in all it is clear that the state of California is trying to promote homeownership that is sustainable, while at the same time preventing foreclosure rates from skyrocketing and home sales prices to plummet. These ideas are a positive step in the right direction and we will see where the program goes after November 1. For more information visit the California Housing Finance Agency (CalHFA) website at http://keepyourhome.calhfa.ca.gov/. You can also call (916)373-2585.