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California to pay mortgages

By Marcie Geffner · Bankrate.com
Thursday, September 16, 2010
Posted: 4 pm ET

Holden Lewis is on vacation for the week. Marcie Geffner will be writing guest posts while he is out.

Yet another new mortgage assistance program will offer some California homeowners subsidies and grants to help them make their mortgage payments, reinstate a mortgage that's in arrears or pay off part of the principal on their loan.

That sounds like good news for those who qualify. But once again, the rules are so restrictive that the number of recipients may be few.

The money, nearly $700 million, comes from the federal government through the California Housing Finance Agency, known as CalHFA.

The program will hand out:

• Up to $1,500 or 50 percent of the mortgage payment (whichever is less) per month for six months to unemployed homeowners in imminent danger of foreclosure.

• Up to $15,000 or 50 percent of the past-due mortgage amount (whichever is less) to homeowners who need to reinstate their loan to avoid foreclosure. The lender, servicer, mortgage insurer and/or borrower must kick in a dollar-for-dollar match.

• Up to $50,000 to homeowners who have "severe negative equity" to reduce their principal balance to a market level to "prevent avoidable foreclosures and promote sustainable homeownership," according to program website, Keep Your Home California.

• Relocation assistance to homeowners who complete a short sale or deed-in-lieu foreclosure.

To qualify, the homeowner must:

• Own and occupy the home as a principal residence.

• Meet low- or moderate-income restrictions.

• Sign a hardship affidavit and supply supporting documentation.

• Have adequate income to make modified mortgage payments.

• Meet other requirements.

The big win, of course, is the principal reduction payout, which is expected to help approximately 13,375 homeowners. A dollar-for-dollar match from the lender is required, but can be waived if the money is structured as a non-interest-bearing subordinate loan to be forgiven over three years if the homeowner keeps the mortgage current.

It's a small drop in an ocean of woe, but for those who've clamored for the government to make homeowners whole, here it is.

A show of hands, please, folks: Who thinks this program is a good remedy for (a) struggling homeowners, (b) the housing markets, (c) the real estate industry, (d) lenders, servicers and investors or (e) taxpayers?

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12 Comments
Marcie Geffner
October 07, 2010 at 10:49 pm

Thanks for sharing your story, David. It's a good example of a point that's often lost: every homeowner is an individual with unique circumstances, and we need to be cautious when we lump everyone in together as if the same shoes fit all sizes. People in different circumstances naturally disagree on what's right or what's fair. That's why discussion should help us all see more sides of an issue.

David
October 06, 2010 at 10:00 am

Brent & Jack,
I agree that there were people who got mortgages that should never have qualified in the first place, But are you so blind not to see that this mess has affected people that were perfectly capable and able to afford their homes & mortgages before the economy tanked??? For instance, I moved my family across country for better schools for my son and a better position with the company I worked for. Put my house up for sale in Vegas that we had owned for 20 years, had 20K in the bank, bought house here with 10% down, had credit scores in the high 700's. Two weeks after arriving in new state my position was ELIMINATED. Went to work for 1/2 of what I was making, (I have NEVER collected unemployment or taken advantage of the system) and continued looking for position to make what I was making. Then the DOO-DOO hit the fan. The Vegas market nose dived, took a YEAR of making TWO mortgage payments before that house sold for what we owed on it (at least we broke even on it as that same house is worth LESS THAN WHAT WE PAID FOR IT IN 1989!!!!)
That whole time depleted our savings, we have 1 vehicle left (a 1992 toyota we bought new for CASH), we DO NOT have flat screen TV's, new wardrobes, my wife has been without a vehicle for 4 years, ran up our credit cards to pay bills and keep current on ou mortgage, sold personal items, etc, etc, etc. Then HAMP came along which we inquired about but because I was current I was told I DIDN'T qualify! CHASE told me I HAD to be behind 3-months to qualify and to NOT pay for three months to get in which I followed their advice and then applied for a three month trial period. I recieved a phone call from CHASE informing us we were accepted and that our payments would be about $600.00 less than our current payment and we would recieve the paperwork to confirm. When we recieved the contract the payments were higher than what they told me over the phone, but still less than our original payment. I figured, OK for three months it's still a help. Well..... the THREE MONTH TRAIL period went on for over NINE MONTHS!!!!!! after the ninth payment, (ALL on time and for the exact amount they requested), they through us out of the program and started with foreclosure proceedings!!!! We are STILL battling with Chase, they now want 16K to reinstate loan,
(how the heck did they come up with that amount???) Our credit scores are in the toilet, we had to file bankruptcy just to keep a roof over our heads! And what pisses me off the most is that OUR tax dollars bailed these shyster banksters out, the CEO of Chase, Jamie Dimon, recieved a 500 MILLION dollar bonus in the spring of 2010!!! How is that right?? I am not against free enterprise, nor do I believe in limiting what someone can earn but, that is just a plain slap in the face of good people who didn't cause this whole fiasco and are struggling to just survive! To sum it up, WE WERE NOT LOOKING FOR A FREE HANDOUT, JUST SOME HELP FROM A BANKING SYSTEM THAT WHEN THEY NEEDED HELP WE OBLIGED WITH OUR TAX DOLLARS!!! Get your facts straight before you open your mouths. It could be you that is in need of some financial help, you NEVER know what tomorrow will bring.
D.

Marcie Geffner
September 21, 2010 at 9:01 pm

A number of excellent points: We are indeed seeing a backlash against homeownership and endangerment of the tax advantages that come with the financial commitment and responsiblity of owning a home. We're also hearing from plenty of folks who definitely do have that steam coming out of their ears (nice visual!) and they're not only taxpayers and renters, but also homeowners on all sides of the foreclosure issue.

Jack
September 21, 2010 at 8:12 pm

It is not a good remedy. People bought houses which they couldn't afford. Period. Let them move in with friends/family and walk away. They couldn't afford the house then and they can't afford it now. This issue is not about unemployment it is about greedy mortgage brokers and stupid home buyers. No matter how painful it is for the rest of us, it all needs to go through. There is no way the gov't can give these people a soft landing. Let them become humble by living with other people or moving to a cheaper place.

Gabriel
September 20, 2010 at 2:03 pm

Here is a simple plan that doesn't require reams of restrictive rules or paperwork: Reduce the principle amount of a homeowner's mortgage in direct proportion to the decline in a state's housing values. The statistics regarding the percentages of decline in any given market can be obtained from various measurable indices such as the Shiller/Case Housing Index, etc. This would be a one-time government mandated writedown to be carried out by the respective regional FHA and the banks. It would be a $1 for $1 match between the banks and the government to make the consumer whole, and to keep the homeowners in their homes. A secondary effect is that the extra cash could be released into the economy in the form of consumer spending to prop it up instead of failed mortgages. The largest banks have already profited tremendously from this housing dilemma at the expense of the consumer. Far too few consumers have benefited from this housing tragedy. It's time for genuine consumer/customer assistance. I applaud California for its willingness to assist their homeowners, but unfortunately there are too many restrictions to help the many.

Shantique
September 17, 2010 at 11:27 am

Who is forcing the banks to comply? If it's nobody, then I see this helping as much as all of the other programs...NOT AT ALL!

Mirian
September 17, 2010 at 2:30 am

I want to refinance but its getting hard because my credit score - 525, 532, my loan is FHA and want conventional. I would like to know what Banks are most flexible in helping homeowners to refinance.

Susan
September 16, 2010 at 9:55 pm

Whether this helps the housing market and real estate industry depends on the number of foreclosures prevented, and whether those households are stabilized for the long haul (pushing the problem out a few months only delays the inevitable).

Of course, lenders will be helped. (They will be the ultimate recipients of the money!)

I do not believe this helps taxpayers. Look at the income chart for this grant (which goes well into the six-figure range for larger households) and then reconcile that with the 9% CA income tax rate that kicks in at $40K/year. (Yes, I do know the $700M comes from the Feds. The Feds got it from the taxpayers.)

Remember also that some of these "severe negative equity" situations were caused by people who ran up their HELOCs buying luxury goods, cars, and vacations.

As such, I would prefer that the $700M go towards helping households in duress due to illness and unemployment, regardless of whether they own homes. Why should homeownership be a barrier to entry for receiving housing security from the government?

Either that or just return the money to the taxpayers (either directly or by fixing our broken CA state budget).

Struggling renters must have steam coming out of their ears. Indeed, I see more and more articles questioning the mortgage interest and property tax deductions. As a homeowner, I would not be at all happy to see those disappear as part of a backlash against these ever-increasing bailouts for homeowners and those who lend to them.

Bottom line: if you cannot afford your mortgage, you need to move. Save the social safety net for those who cannot afford any housing at all.

brent
September 16, 2010 at 7:17 pm

I'll show my hand as an "F," a choice not on your list. This and other programs like it are nothing short of more government bailouts for irresponsible behavior on defaulting homeowner's behalf. The only sympathy I have is for the "few" unemployed folks that are down and out... however, from what I read and see (personally)most defaults are of one or two categories; 1. they never could afford the payment but took the money anyways, and a lot of times they cashed out, spent the money and face no real consequence or 2. they simply think the lender should indemnify them if their property loses value... The government should simply step aside and let this thing play out... Maybe even try to encourage people to make their mortgage payments and not continue to support default... How about some personal responsibility!