In a recent attempt to buoy the few still struggling California homeowners, the mortgage assistance program, Keep Your Home California, has been extended with an addition of $383.3 million in federal funding this year. The funds are expected to aid an estimated 12,000 additional California homeowners with up to $100,000 in mortgage payment assistance per eligible homeowner.
The California program is part of the nationwide Hardest Hit Fund created to assist struggling homeowners and prevent foreclosures in the 18 states harmed most severely by the economic crisis. The program launched in 2011, well after the worst of the financial carnage of mass foreclosures had occurred. Though initially scheduled to sunset in 2017, Keep Your Home California will now continue through December 31, 2020.
Since its inception, the program has issued $1.34 billion in mortgage assistance and benefited more than 62,200 California homeowners — a small number compared to the more than 990,000 homes foreclosed between 2007 and 2014 alone.
Financial assistance for homeowners
Keep Your Home California primarily provides mortgage payment assistance to low- to moderate-income homeowners experiencing a financial hardship resulting from such things as:
- unaffordable payments; or
- negative equity.
Homeowners who meet income eligibility requirements can qualify for aid under four Keep Your Home California programs:
- Unemployment Mortgage Assistance Program (UMA) provides unemployed homeowners with up to $3,000 per month in mortgage payment assistance.
- Mortgage Reinstatement Assistance Program (MRAP) offers homeowners as much as $54,000 to bring them current on delinquent mortgage payments.
- Principal Reduction Program (PRP) helps underwater homeowners who have suffered a financial hardship pay down the principal balance on their mortgage.
- Transition Assistance Program (TAP) provides financial aid to transition homeowners into affordable housing after undergoing a short sale or deed-in-lieu of foreclosure.
Further, a new program called the Reverse Mortgage Assistance Pilot Program was introduced in 2015 to provide senior homeowners with up to $25,000 to pay outstanding property expenses for their Home Equity Conversion Mortgage (HECM), a reverse mortgage insured by the Federal Housing Administration (FHA).
An ongoing demand
Though California’s economy has improved at an amazing pace since the pit of the 2008 recession — and job numbers continue to rise along with home prices — some homeowners still wrestle with unmanageable mortgage payments. In Q1 2016, 395,500 homes remained underwater in California (about 5.9% of mortgaged homes).
The persistence of underwater homes signals a critical need for continuing aid to struggling homeowners — one that even surpasses the resources available through Keep Your Home California. Nonetheless, the program’s continuation is promising for homeowners in the poorer parts of the state. It will help ease a portion of the mortgage debt still weighing down California homeowners who are undergoing distress.
However, timing has always been a questionable element of Keep Your Home California. The program rolled out in 2011, multiple years after the worst damage of the 2008 financial crisis had been inflicted and when governmental intervention would have been most effective. No clear goals were established at its inception that would signal the ultimate success or failure of the program. And without this objective, it is difficult to determine when the program has accomplished what it set out to do and ought to rightfully end.
Its recent extension simply underscores the fact the market still has healing to do and complete normalcy has not fully returned — and won’t until the extended sunset date of 2020.
Qualifying for assistance
While negative equity is still a problem for many homeowners, an underwater mortgage alone is not enough to obtain assistance through Keep Your Home California.
Keep Your Home California enforces several eligibility standards, which vary for each specific program. General eligibility guidelines require a homeowner:
- occupy the property as their primary residence;
- meet low to moderate income limits for their location;
- have a hardship evidenced by a signed Hardship Affidavit; and
- have adequate income to sustain mortgage payments after receiving program assistance.
Keep Your Home California considers the following hardships:
- severe reduction in household income;
- an increase in expenses beyond the homeowner’s control;
- unemployment or extended underemployment;
- death in the family;
- significant medical bills;
- divorce; and
- severe negative equity indicative of imminent default.
Further, eligibility guidelines require:
- the property be an inhabited single family residence (SFR) with one to four units located in California;
- the mortgage be in a first lien position;
- the remaining unpaid principal balance on the mortgage be $729,750 or less; and
- the mortgage be delinquent or at risk of imminent default.
Approval ultimately depends on whether a homeowner’s mortgage servicer accepts the offer of assistance from Keep Your Home California. Currently, several mortgage servicers participate in the program.
When a homeowner is approved for assistance, Keep Your Home California provides the agreed-to payment assistance and places a junior lien on the home, to be forgiven after five years from the date of assistance. Selling, refinancing or obtaining a reverse mortgage on the home during the five-year period will obligate the homeowner to pay back the assistance. Thus, the program does not put homes on the market for sale.
As a real estate agent, you can inform the public you have contact with about the homeowner assistance to help retain their home provided by Keep Your Home California. More information is available by calling 888-954-KEEP (5337) or visiting www.KeepYourHomeCalifornia.org.
The program accepts applications in multiple languages and does not charge fees for any of their services.