Keep Your Home California expands Principal Reduction Program to help some homeowners with underwater mortgagesPosted: December 5, 2013
Homeowners flailing financially with severely underwater mortgages could receive a much-needed life vest – possibly as much as $100,000 in principal reduction from Keep Your Home California
The state-managed program will now consider homeowners with a loan-to-value ratio of 140% or greater as suffering a financial hardship, making them eligible for Keep Your Home California. It’s the latest change to the Principal Reduction Program, which has been expanded several times to help more homeowners since the program started in February 2011.
The $2 billion, federally funded program made the change after determining that there are still thousands of homeowners, especially in some of the hardest-hit housing regions such as the Central Valley and the Inland Empire, with loan-to-value ratios of 140% or higher. These homeowners have been sitting on the sidelines, hoping for some help with their severe negative equity. Under the recent change, the free mortgage-assistance program will help low and moderate income homeowners reduce their loan-to-value ratio to possibly 105%. For example, a homeowner who owes $280,000 on a home with a $200,000 value could have his principal reduced to $210,000.
Of course, homeowners must meet county-by-county income requirements (a complete list is available at http://keepyourhomecalifornia.org/income-limits/) and their mortgage servicer must participate in the program.
Currently, more than 100 of the 160 mortgage servicers – including Bank of America and Wells Fargo Bank – participate in the Principal Reduction Program. These servicers manage a large majority of homeowners’ mortgages in California. Check the complete list of mortgage servicers participating at http://keepyourhomecalifornia.org/participating-servicers/.
And homeowners using the Principal Reduction Program must remain in their home for at least five years. If the homeowner sells prior to that date, they may be required to pay back the assistance from the proceeds of the sale of the home if there is enough equity.
The 140% or greater loan-to-value ratio only affects the Principal Reduction Program. The other three programs require more traditional financial hardships, such as a job loss, cut in pay, a divorce or extraordinary medical bills.
Keep Your Home California has helped more than 32,000 homeowners since February 2011.
If you have additional questions or would like to apply for the program, call 888-954-5337 or visit www.keepyourhomecalifornia.org (Spanish speakers should visit www.conservatucasacalifornia.org). The counseling center is open 7 a.m. to 7 p.m. weekdays and 9 a.m. to 3 p.m. Saturdays.
Image courtesy of Renjith Krishnan at FreeDigitalPhotos.net.
California has been enjoying some of the fastest-rising home prices in the nation, but many homeowners are still struggling with their mortgage payments.
Double-digit gains in home prices are great for homeowners, but they don’t help the immediate need of making the monthly payment.
Keep Your Home California – a free, state-run program – could be the answer for hard-hit homeowners who have an economic hardship and have experienced a dramatic decline in their home’s value. Keep Your Home California’s Principal Reduction Program offers as much as $100,000 to help homeowners, possibly lowering mortgage payments by hundreds of dollars per month.
In fact, for homeowners approved for principal reduction during the first three months of 2013, their median monthly payment was curbed from $1,848 to $1,478. Could you use an additional $370 per month or about $4,500 per year?
Because many mortgages remain underwater — about one of every four homeowners with a mortgage owes more than the value of their homes — more homeowners are looking into principal reductions. Keep Your Home California has been handling many more applications for principal reduction recently, with applications soaring 43% during the first quarter, compared to the fourth-quarter of 2012.
More participating mortgage servicers – the companies that collect your monthly payments – and the new loan recast option are the primary reasons for the increase. Under a loan recast, homeowners can be approved for principal reduction without a formal loan modification. Basically, Keep Your Home California has made principal reduction much easier during the past several months.
Keep Your Home California has helped a couple thousand homeowners with principal reduction. Some are still in process while others have been funded already –, but thousands more could benefit from the program. It requires some paperwork and patience; the average application took about 80 days during the first quarter, down from 114 days in first-quarter 2012.
Of course, homeowners must meet income requirements (county-by-county limits area available at http://keepyourhomecalifornia.org/income-limits/) and their mortgage services must participate in the Principal Reduction Program. Currently, 77 mortgage servicers – including Bank of America and Wells Fargo – are enrolled in the program (check out the complete list at http://keepyourhomecalifornia.org/participating-servicers/).
If you have questions or would like to apply for the program, call 888-954-5337 or visit www.keepyourhomecalifornia.org (Spanish speakers should visit www.conservatucasacalifornia.org). The counseling center is open 7 a.m. to 7 p.m. weekdays and 9 a.m. to 3 p.m. Saturdays.
Image courtesy of Stuart Miles FreeDigitalPhotos.net
The banking giant – best known for its decades-old stagecoach marketing campaign – has joined Keep Your Home California’s Principal Reduction Program, which offers homeowners as much as $100,000 to reduce their mortgage principal and monthly payments.
Keep Your Home California is anticipating the bank’s participation will lead to many more homeowners applying for mortgage assistance and allow them to get the help they need. If approved for the program, homeowners can save hundreds of dollars every month and tens of thousands of dollars over the life of their mortgage.
Wells Fargo joins several other major banks, including Bank of America and Chase participating in the Principal Reduction Program.
Keep Your Home California has made some big changes to the Principal Reduction Program, all in an effort to attract and make it easier for homeowners and mortgage servicers.
Most notably, the program eliminated the dollar-for-dollar match requirement by servicers last spring, taking on 100 percent of the funding. So, Keep Your Home California will commit as much as $100,000 per homeowner, handle the application and documentation, and oversee the entire process.
The changes were made with the goal of helpig more homeowners remain in their homes and maintain an affordable, sustainable mortgage payment for years to come.
Keep Your Home California has set aside about $772 million for the Principal Reduction Program, enough to help almost 9,000 homeowners in the state. $500 million is still available so homeowners are encouraged to apply while plenty of funding is still available.
Of course, Keep Your Home California depends on mortgage servicers participating in the program. Currently, about 100 mortgage servicers participate in Keep Your Home California, with almost half enrolled in the Principal Reduction Program.
Wells Fargo, after enrolling in Principal Reduction, participates in all four Keep Your Home California programs. The other three programs are the Mortgage Reinstatement Assistance, the Unemployment Mortgage Assistance, and the Transition Assistance Program.
If you would like more information about Keep Your Home California, check http://www.keepyourhomecalifornia.org/ (or http://www.conservatucasacalifornia.org/ in Spanish) or call 888-954-5337. The processing center is open 7 a.m. to 7 p.m. weekdays, and 9 a.m. to 3 p.m. Saturdays. Calls can be accommodated in virtually any language.
Keep Your Home California has provided nearly $240 million in funding to over 20,000 homeowners since the program started in February 2011.
Recast is a little-known, seldom-used tool in the mortgage world. But recast mortgages could be just-the-right answer to attracting more big-name servicers to the Principal Reduction Program – and helping more homeowners.
Now, many servicers — including Bank of America and Wells Fargo – offer to recast mortgages, but the practice is seldom used. Instead, loan modifications and refinancing often take center stage.
But recast offers a no-muss, no-fuss solution for homeowners, servicers and Keep Your Home California. The state-managed mortgage assistance program will begin recasting mortgages within the next several weeks after U.S. Treasury officials approved the plan in mid-July.
A recast allows a large chunk of money to lower mortgage principal without affecting the interest rate or the length of the loan. For example, if you owe $300,000 on your current mortgage and Keep Your Home California approves $75,000 to lower your principal, then your current monthly payments would be based on $225,000 and the same interest rate. Plus, no additional time is added to the mortgage.
Recast could save the average homeowner hundreds of dollars every month in mortgage payments – and thousands of dollars every year. Over the life of the loan, well, you get the idea.
Homeowners benefit with a lower monthly payment, the same interest rate and reduced principal. Some homeowners could even qualify to refinance their mortgages under the Home Affordable Modification Program (HAMP).
And servicers, basically the companies that oversee the mortgages (the ones you send the money to every month) have very little to do with the process. Under the recast plan, Keep Your Home California will handle the documentation, from checking the homeowner’s credit report to determining the value of the property.
Plus, Keep Your Home California eliminated the dollar-for-dollar match by servicers this spring, with the federally funded program accepting 100 percent of the financial roll. So, Keep Your Home California – a $2 billion, federally funded program – will commit as much as $100,000 per homeowner, handle the application and documentation, and oversee the process.
Sounds like a win-win for everyone, right? Well, we would like more servicers, especially the major players, to join the game. The more servicers enrolled in the Principal Reduction Program, the more homeowners we can help.
Currently, only Bank of America among the Big Five mortgage servicers is participating in the program.
Overall, more than 25 servicers are participating, with about 10 joining in recent weeks – including GMAC and Ocwen Loan Servicing LLC – after the elimination of the dollar-for-dollar match. But we want more servicers to enroll in the program, from the big-name banks to the community-focused credit unions.
Keep Your Home California is excited about the groundbreaking changes, with the recast model serving as a role model for other states. Now, we just need more servicers to step up to the plate – and more homeowners eligible to apply for the program.
You can get more information about the Principal Reduction Program at http://www.keepyourhomecalifornia.org/prp.htm. Also, please remember that your servicer must participate in the program in order to apply. You can check out the complete list of participating servicers at http://www.keepyourhomecalifornia.org/participating.htm.
If you would like more information about Keep Your Home California, check http://www.keepyourhomecalifornia.org/ (or http://www.conservatucasacalifornia.org/ in Spanish) or call 888-954-5337. The processing center is open 7 a.m. to 7 p.m. weekdays, and 9 a.m. to 3 p.m. Saturdays.
Note: This is the third blog in a series that details the four programs available from Keep Your Home California.
Many cash-strapped homeowners in California are staggering from a powerful one-two punch – getting behind on their monthly mortgage payments while the value of their home plummets.
For these hard-hit homeowners, the American dream has become a real-life nightmare. But a Keep Your Home California program can cut principal, lower monthly payments and reduce the number of toss-and-turn nights.
The appropriately named Principal Reduction Program offers low- to moderate-income homeowners as much as $50,000 to reduce the money owned on their mortgage. Now, lenders/mortgage servicers must participate in the program – and provide capital on a dollar-for-dollar matching basis. So, some homeowners could receive as much as $100,000 over a three-year period (now, that got your attention, huh?)
Currently, 11 mortgage servicers participate in the Principal Reduction Program, including Bank of America and GMAC. But more mortgage servicers (learn about servicers here) join the lineup every few weeks, so keep checking the complete list at http://www.keepyourhomecalifornia.org/participating.htm.
Keep Your Home California – funded with $2 billion as part of the U.S. Treasury’s Hardest Hit Fund – has set aside more than $790 million to assist homeowners “underwater” with their current mortgages through the Principal Reduction Program. And there are many homeowners that owe more – in many cases, a lot more – than the current value of their home.
In fact, the GoldenState has more than 2 million underwater mortgages, about 30 percent of the outstanding mortgages – the fifth-highest rate in the nation, according to industry tracker CoreLogic. However, California is far from the hard-to-believe 60% rate in Nevada.
So, as you can tell from the data, news reports and just talking with family members, friends and neighbors – or maybe even looking in the mirror – underwater mortgages are a serious problem in the state.
Now, just like any of the Keep Your Home California programs, there are some requirements, most notably the mortgage must be delinquent or at risk of imminent default.
In addition, just like the previously mentioned Mortgage Reinstatement Assistance Program, homeowners must have adequate income to make the modified mortgage payments. Quite simply, we need to ensure that homeowners approved for the program are financially able – and willing – to make the monthly payments and meet lender requirements. Otherwise, we are setting aside dollars that could be used for another family in desperate need of mortgage assistance.
The Principal Reduction Program also follows the same basic requirements as those mentioned in the previous two blogs:
- The first lien mortgage must be originated on or before Jan. 1, 2009.
- The applicant must own and occupy the home, which includes condominiums or town houses.
- The house must be the homeowner’s primary residence.
- Homeowners must agree to provide all necessary documentation.
- Financial hardship cannot be from a voluntary employment resignation (as in “I quit!”).
The Principal Reduction Program has other requirements, so we encourage you to read the summary guidelines at http://www.keepyourhomecalifornia.org/programs/prp.pdf .
But if you’re a homeowner facing foreclosure or are seriously underwater with the mortgage, consider the program – and let Keep Your Home California work for you.
As always, if you would like more information about Keep Your Home California and our four programs, check www.KeepYourHomeCalifornia.org (www.ConservaTuCasaCalifornia.org in Spanish) or call 888-954-5337 from 7 a.m. to 7 p.m. Monday through Friday, and 9 a.m. to 3 p.m. Saturdays.