June is Homeownership Month, when federal and state agencies, lenders and real estate agents educate and encourage home-shoppers to become homeowners.
Homeownership is critical for building strong communities, creating jobs, energizing the economy – and is often a good investment for homeowners over time.
Keep Your Home California was established as a result of the Great Recession. The goal was to help neighborhoods, communities, the economy and, of course, homeowners by providing mortgage payment assistance to people who suffered financial hardships in order to keep them in their homes.
So far, the federally funded, state-managed program has helped more than 64,000 homeowners avoid foreclosure since early 2011.
Many of these families would have lost their homes, and it would have taken several years before they could have been eligible to apply for a mortgage and return to being homeowners. Some homeowners may have never been able to afford a home down the road, especially with fast-rising home prices and much-stricter lending requirements.
In fact, only one of every three families could afford to buy the median-priced home in California during the first quarter of 2016, according to the California Association of Realtors.
California’s homeownership rate was about 54% in 2015, much lower than the 61% in 2006 (considered the peak of the housing market) — and a full 10 percentage points below the 64% rate nationwide, according to the U.S. Census Bureau.
In short, buying – and owning – a home in California is much tougher today than a decade ago.
So, Keep Your Home California’s financial assistance to hard-hit homeowners during the past several years is arguably just as important as helping first-time homebuyers. Perhaps even more.
Of course, many of the housing market problems continue to plague Californians.
Foreclosures and short sales dominated headlines – and the housing market – from 2007 through 2012. While foreclosures have dropped from the highs of that time period, there were still 23,000 homeowners faced with losing their home and leaving their neighborhoods during the past year, according to the most recent CoreLogic report.
Even with the higher prices, unaffordable or underwater mortgages – where homeowners owe more than the value of their home — are still a concern for many homeowners, especially in the Central Valley, the Inland Empire (Riverside and San Bernardino counties) and Northern California. About 400,000 homes with mortgages are underwater in California, according to the most recent data.
California’s housing market has definitely improved, but it still has a long way to go for many homeowners. So, as we celebrate the efforts to help people become homeowners during Homeownership Month, we should also recognize the importance of homeownership preservation.
Keep Your Home California services are provided free of charge. The program helps homeowners faced with a financial hardship, such as a job loss, cut in pay, divorce, death or extraordinary medical benefits. Homeowners with unaffordable or underwater mortgages can qualify for the Principal Reduction Program, which offers as much as $100,000 on mortgage assistance.
Under the Unemployment Mortgage Assistance Program, out-of-work homeowners could receive as much as $3,000 per month for up to 18 months – or $54,000 total – in mortgage assistance. Homeowners must be eligible for jobless benefits. About 1 million Californians are unemployed, according to the Employment Development Department.
Homeowners must meet county-by-county income requirements, which range from more than $70,000 in rural areas to almost $130,000 in higher-priced regions, such as the Bay Area and Orange County. And a homeowner’s mortgage servicer, the company that collects the monthly payments, must participate in the program. More than 250 mortgage servicers – including Bank of America, Wells Fargo and Chase – are enrolled in Keep Your Home California.
Homeowners interested in learning more or applying for the program should call the counseling center at 888-954-5337 or find more information at www.KeepYourHomeCalifornia.org or at www.ConservaTuCasaCalifornia.org for Spanish speakers. The counseling center is open 7 a.m. to 7 p.m. weekdays and 9 a.m. to 3 p.m. Saturdays. Calls can be taken in virtually any language through a free translation service.
Keep Your Home California has received an additional $383.3 million in funding from the federal government, providing the free mortgage-assistance program with resources to help at least 12,000 more homeowners.
The U.S. Department of the Treasury announced the additional funding last month, the second phase of funding approved for Keep Your Home California from the Hardest Hit Fund during the past three months.
With the additional dollars, Keep Your Home California will continue to December 31, 2020, or until the money is used. Previously, the deadline for the federally funded program was December 31, 2017.
“The announcement of additional funding for Keep Your Home California further validates the ongoing challenges many Californians are experiencing with homeownership,” said state Treasurer John Chiang. “We are excited to have the opportunity to help many more California homeowners who are struggling with their mortgages due to unaffordable payments, unemployment, negative equity and other financial hardships.”
The additional funding comes soon after Keep Your Home California reported its two best quarters since the state-managed program started in February 2011. Keep Your Home California issued more than $95 million in funding during the third and fourth quarters of 2015 – or a combined $190 million-plus for the second half of last year.
“While the housing market continues to recover, we know some homeowners and areas are still experiencing the damaging effects of the housing crisis,” said Mark McArdle, Treasury Deputy Assistant Secretary for Financial Stability.
California – the nation’s largest housing market and one of the hardest-hit from the housing crisis several years ago – had more than 1 million jobless residents in March. At least 50,000 homeowners in the state are 90 days or more behind on their mortgage payments, which often leads to foreclosure. California also has the most negative-equity than any state at $65 billion.
“The demand for assistance from homeowners and the figures from housing industry reports clearly demonstrate the continued need for Keep Your Home California,” said Tia Boatman Patterson, Executive Director of the California Housing Finance Agency. The state agency oversees Keep Your Home California. “Our primary goal is to help struggling homeowners with their mortgage problems, but everyone, from neighborhoods to state government, benefits from Keep Your Home California.”
Keep Your Home California helps homeowners faced with a financial hardship, such as a job loss, cut in pay, divorce, death or extraordinary medical benefits. Homeowners with unaffordable or underwater mortgages could qualify for the Principal Reduction Program, which offers as much as $100,000 on mortgage assistance.
Homeowners must meet county-by-county income requirements, which range from about $70,000 in rural areas to more than $120,000 in higher-priced regions, such as the Bay Area and Orange County. And a homeowner’s mortgage servicer, the company that collects the monthly payments, must participate in the program. More than 250 mortgage servicers – including Bank of America, Wells Fargo and Chase – are enrolled in Keep Your Home California.
Homeowners interested in learning more or applying for the program should call the counseling center at 888-954-5337 or find more information at www.KeepYourHomeCalifornia.org. The counseling center is open 7 a.m. to 7 p.m. weekdays and 9 a.m. to 3 p.m. Saturdays.
Editor’s note: Zillow has provided a special blog for Keep Your Home California, detailing the financial challenges of owning a home in California.
California’s real estate scene has received a lot of attention over the last few years. While prices skyrocketed in San Francisco, 10.2 percent of homeowners in Riverside are facing underwater mortgages. For many individuals, rising home prices coupled with stagnant wages in the last decade have caused concerns about the affordability of homes across California.
Check out these five markets where Zillow calculated whether a median priced home would be affordable for a family earning the median income for that city.
Los Angeles boasts a median home value of $586,000 as of February 2016. A simple mortgage calculator shows that a median-priced L.A. home with a traditional 20 percent down payment and 3.5 percent mortgage rate would result in a $2,760 monthly payment, including taxes and insurance.
Assuming that an individual is making the median income for an L.A. household, $49,682, a median-priced home in L.A. would not be affordable. One of the factors that lenders look at during the mortgage approval process is your debt-to-income ratio (DTI)—the total of your housing expenses and other monthly loans (including credit card, student loan and car loan debts) divided by your gross monthly income. For a conventional loan, you need a DTI of 36 or less. With an annual salary of $49,682 and zero existing debts, a DTI of 36 would allow you to qualify for maximum mortgage payment of $1,489 according to a DTI calculator.
Using the general rule for affordability—that a buyer’s mortgage, taxes and insurance should not exceed 25 to 28 percent of his or her gross monthly income—a median income earner in L.A. should spend no more than $1,035 to $1,159 on housing costs. Regardless of which calculation method is used, the monthly payment of a median priced Los Angeles home, $2,760, would far exceed what these calculations show is considered affordable on a salary of $49,682.
Home prices in San Diego are slightly lower than Los Angeles with a median home value of $531,000.* The median income however, is higher in San Diego, at $65,759. While a lower median home value and higher median income is generally a sign that homes are more likely to be affordable in that area, a median-priced home in San Diego still isn’t quiet affordable on a median salary.
Based on a DTI of 36, you could qualify for a maximum mortgage payment of $1,973 with a salary of $65,759. However, the monthly mortgage on a $531,000 home, assuming 20 percent down and a 3.5 percent mortgage rate, would run you $2,508. The general rule of affordability paints an even worse picture. On a median San Diego income, you would want to spend no more than $1,369 to $1,534 on your monthly housing costs. The average San Diego earner would have to increase their income in order to afford a median-priced home or consider less conventional financing options that allow for a DTI ratio higher than 36.
Homes in Sacramento are priced significantly lower than other major California metros while the median income is comparable to those other metros. The median home in Sacramento will cost you $259,600* while the median household income sits at $50,013.
Using the same calculation, the monthly mortgage for a $259,600 home with 20 percent down and a 3.5 percent mortgage rate, would be $1,260. The DTI calculator indicates that you could afford to spend $1,500 on your mortgage if you had an income of $50,013 and no other debts. According to these calculations, a median earner in Sacramento could actually afford a home priced above the median home value in Sacramento.
The general rule of affordability does not generate exactly the same positive outlook. On a $50,013 salary, the rule suggests you’d want to spend between $1,041 and $1,166 on your housing costs each month. While this rule indicates you’d be spending more than 25 to 28 percent of your income to afford the $1,260 payment on a median priced Sacramento home, you’d be just outside the suggested percentage for housing costs. Overall, the median earner in Sacramento could likely afford the median priced home.
Both the median home price and median income are higher in San Jose than most other California markets. A median San Jose home will cost you a whopping $817,000* while the median earner can expect to bring home $83,787. Affordability may be a serious concern in San Jose, even for those bringing home $83,787 annually, as they would not be able to afford a median-priced home.
With a DTI of 36 and zero debts, an individual earning $83,787 can expect to qualify for a maximum monthly mortgage of $2,514. Using the general affordability rule, that same individual should expect to spend $1,745 to $1,955 if they want to spend 25 to 28 percent of their gross monthly income on housing. However, the mortgage for a median-priced home in San Jose would be $3,822 each month. Both calculations indicate that you’d have to be earning well over the median in San Jose.
Oakland, once known as San Francisco’s less expensive neighbor, is also now seeing steadily rising housing prices. The median Oakland home now goes for $586,800* while Oakland residents make a median household income of $52,962.
The DTI calculation suggests that with a DTI of 36 and the salary of a median Oakland household, the maximum mortgage payment an individual could qualify for is $1,598. However, the monthly mortgage payment on a median-priced Oakland home with a traditional 20 percent down payment and a 3.5 percent mortgage rate would cost $2,764—unaffordable on the median Oakland salary. The general affordability rule also indicates the median home in Oakland would be unaffordable for a median earner with a suggested monthly housing cost of only $1,103 and $1,235.
While the high prices in some California markets are discouraging to potential homebuyers – and shed light on affordability issues for homeowners who are struggling to stay in their homes – the numbers vary significantly by market. Affordable areas exist, but there are certainly a lot of areas where low to moderate income Californians face homeownership challenges.
*Median home prices are reflective of market data from February 29th, 2016 on Zillow’s Home Value Index.
If you are dealing with an unaffordable mortgage, please consider Keep Your Home California, a free mortgage-assistance program that offers as much as $100,000 in principal reduction. You can call the counseling center at 888-954-5337 or find more information at www.KeepYourHomeCalifornia.org.The counseling center is open 7 a.m. to 7 p.m. weekdays and 9 a.m. to 3 p.m. Saturdays.
Our previous two posts dealt with the origins of the Foreclosure Rescue Scam and provided some characteristics to help homeowners recognize a scam from a safe distance. Even armed with good information, it’s sometimes hard to differentiate the good guys from the bad.
The scammer is well rehearsed at sounding smart, compassionate and sincere. At Keep Your Home California, we investigate these people fairly often and we seldom find conclusive evidence of their misdeeds. In this post, we will provide you with some practical steps that you can follow to review and identify these con artists. Warning: None of these techniques are foolproof and it’s very difficult to identify a scammer with any level of certainty.
It is our hope that by doing a little research, you might uncover enough “red flags” to steer you away from potential danger before you lose any money. Here are a few simple steps that you can take to perform a high-level review:
- Review correspondence from the potential Scammer. It’s likely that most of your contact with a scammer will be by email and telephone. The scammer typically doesn’t want to meet face-to-face. It’s unlikely they have an office and they might be located nowhere near you. Look at their email address. Is there a company or organization designation? Very often, scammers use public email services such as Hotmail, AOL or Gmail because they don’t work for a legitimate organization. A public email address is a red flag.
- Ask about and verify licenses. Sometimes the scammer claims to be an attorney or claims to have a real estate license. They may tell you not to contact your lender, lawyer or credit counselor. Ask for their license or bar number and then verify the license with the State Bar of California or the California Bureau of Real Estate. Even without a number, you can search by name.
- For an Attorney Search, go to http://members.calbar.ca.gov/fal/membersearch/quicksearch. Contact the attorney using the phone number listed in their profile, not the number given to you by the Scammer, to verify that the person listed is actually the person who contacted you.
- To verify a Real Estate License, go to http://www2.dre.ca.gov/PublicASP/pplinfo.asp. Independently locate a phone number, using the internet or other genuine phone directories, and contact the person to verify that the person listed is actually the person who contacted you.
- Evaluate their website … if they have one. The absence of a website is a major red flag. However, most scammers have a website. And, because they often have to change names to elude being caught, their websites are usually very sparse. A few pages without much real content and almost never the names, or photographs, of any employees, managers or executives. Their “Contact Us” page will usually be limited to an online contact form. No physical address, no phone numbers, no email addresses.
- Check their physical address. If you do happen to have what appears to be a physical address, put it into Google Maps and see what appears. Go to the “Street View” if it is available. You might see an office building or a private residence but, more often than not, you will see a shopping center and one of the tenants in that shopping center will be a UPS Store, or similar mailbox service. Red flag!
- Perform an Internet search. Use an effective search engine and look for the name of the company, of any individuals you can identify, and also search phone numbers that you have been given. If you poke around enough, you just might find useful information such as previous complaints.
- Requests for fees. Any request for fees or money before any services are performed, payments in cash, money order or “wire transfers” are all warning signs.
Please remember that you might be dealing with criminals and we aren’t advocating that you become a private investigator or vigilante. Do not, in the course of your review, misrepresent yourself or violate anyone’s rights or privacy. If your research indicates that you are likely dealing with a Scammer, do not confront them, simply disengage.
Image courtesy of Stuart Miles at FreeDigitalPhotos.net.
In our previous post, we discussed the rise of the “Foreclosure Rescue Scam” in California. We fittingly described the scammers as predators and, like most predators, the scammer looks for the most vulnerable and helpless of prey.
In this case, they are seeking homeowners who, facing the frightening possibility of foreclosure, are desperately grasping for any possibility of regaining their financial footing and saving their home. The scammer hopes that fatigue and fear will cause the homeowner to drop their guard, to cling to false promises, and to surrender both their hope and what little money they may be able to scrape together.
The challenge is that the scammer is camouflaged and really hard to spot. He looks legitimate, sounds confident and says all of the right things. But, upon closer examination, the scammer can be identified for what he really is — a fraud.
Look for these warning signs of a scam:
- Promises of guaranteed results. The scammer will say that he has done this hundreds of times, that he has relationships with loan servicers and that he knows exactly how to work the system in order to stop every foreclosure and save every home. No legitimate foreclosure prevention program will make these types of unconditional claims.
- Instructions that isolate the homeowner. The scammer doesn’t want a homeowner talking to their loan servicer, to a certified housing counselor, to an attorney or to a real program such as Keep Your Home California. Their scam depends upon their ability to make a homeowner believe that their only hope begins and ends with the Scammer.
- Advice that includes not making, or diverting, mortgage payments. The scammer wants money. It is to his advantage to convince a homeowner that they should not send money to their loan servicer. While not a common practice, the scammer will sometimes convince a homeowner that, in addition to fees, they should also send their mortgage payments to the scammer to be held in trust until their modification is complete.
- Asking for upfront fees or a payment plan. The scammer will insist that the homeowner immediately begin paying his fees and he will try to get as much as possible in the first payment. Fees can range from several hundred to, more often, several thousands of dollars. The “sweet spot” in California seems to be fees of about $3,000, but we’ve seen people taken for well over $10,000. The scammer is an opportunist and he will take as much as he can get and he is willing to set-up a payment plan if that means draining even more of the homeowner’s scarce resources.
- Any scheme that involves transferring title to a home. Some of the more elaborate scams involve transferring all, or part, of a homeowner’s interest in their property. It seems illogical to think that someone would transfer title to their home in order to save it, but it happens often. The scammer will describe a complicated scheme that may involve the homeowner leasing their own home and earning their title back over time. Once title has transferred, these scams are very difficult, and expensive, to undo and likely will require the help of an attorney.
If you believe that you have been the victim of a foreclosure rescue scam, the following Government agencies offer the opportunity to file a complaint:
- Office of the Attorney General at oag.ca.gov/contact/consumer-complaint-against-business-or-company;
- California Bureau of Real Estate at dre.ca.gov/Consumers/FileComplaint.html;
- HUD Office of Inspector General at hud.gov/offices/oig/hotline/;
- Federal Trade Commission at ftc.gov/ftc/contact.shtm.
In our next installment, we will discuss some simple steps you can take to verify the legitimacy of anyone who approaches you offering help with foreclosure prevention.
Losing a home to foreclosure is most often viewed, by those standing safely outside the transaction, as an economic event. And that is certainly true.
However, for those living under the threat of losing their home, the experience is much more personal.
The thought that one’s home might be involuntarily swept out from under them unleashes a flood of emotions that may include fear, anger, depression, shame and frustration. People in the foreclosure process seldom mention money or wealth creation or asset preservation. They speak instead in terms of not uprooting their kids, of loving their home, their neighborhood and their schools.
We have heard firsthand many of the voices of those standing on the brink of losing their home. Even when clouded by anger, their words are filled with fear and anguish and desperation.
As with any disaster that leaves in its wake hurting and desperate people, the foreclosure crisis gave rise to a class of ruthless predators seeking personal gain at the expense of those who can afford it least.
Foreclosure rescue scams were born as a growing number of Californians were fighting to save their homes while facing a complex and daunting foreclosure process. Legitimate sources of assistance, such as the Home Affordable Modification Program (HAMP) and Keep Your Home California (KYHC), also arose as viable options for homeowners, but often the false hope and empty promises of the scammers drown out the messages of these bona fide programs.
Over time, the scammers learned how to look and sound like real rescue programs. They frequently adopt names with elements of HAMP or KYHC embedded in them. To the untrained eye, their websites look legitimate, often using language and graphics taken directly from keepyourhomecalifornia.org.
The scammer sometimes tries to look like a government agency, sometimes like a law firm and sometimes they even have on their websites warnings about foreclosure rescue scams. Many of these con artists worked previously in the mortgage industry – so they speak the language. They look legitimate, say all the right things, and make promises that speak to the deepest fears of a homeowner in crisis.
The scammer leverages the emotions of hurting and scared people and then tries to strip them of what little resources they have remaining. In addition to having their money stolen, homeowners in the hands of a scammer lose valuable time and often go so deeply into the foreclosure process that any chance they had of saving their home, and any shred of remaining hope, is gone.
The scammer claims to have special powers over Loan Servicers and promises to fight for the homeowner, stop their foreclosure, and make all of the stress and turmoil disappear. To a beleaguered homeowner, weary from the fight, the scammer looks like an ally and a savior. But know this, these thieves have no influence, no power, and the only thing they want to relieve a homeowner of is their money.
In our next installment, we will discuss the keys to identifying a scam and what actions should be taken if you have been the victim of a foreclosure rescue scam.
Keep Your Home California turns five years old in February.
And like any 5-year-old, the free mortgage assistance program has changed, a lot.
When Keep Your Home California debuted, the state’s once-booming housing market had collapsed. Foreclosures dominated many communities, from Crescent City to Chula Vista. Home values plummeted statewide, in some cases by more than 50%.
Homeowners across the state were in need of financial help – and even an inkling of hope that they could remain in their homes. Fortunately, Keep Your Home California was – and still is – able to provide both, with up to $100,000 in mortgage payment assistance.
From the start, the four Keep Your Home California first mortgage programs were designed to help homeowners address hardships from different aspects of the foreclosure crisis. If you lost your job, the Unemployment Mortgage Assistance Program could make your payments for you while you looked for work. If you had severe negative equity, the Principal Reduction Program could reduce the outstanding principal balance you owed. And so on…
Officials with the state-managed program are constantly looking at ways to improve Keep Your Home California. As a result, there have been several changes along the way.
All of the changes were based on data and feedback program officials have collected from applicants over the years. If certain things weren’t working, they were changed or discontinued. If other things were working, they were expanded or remained in place.
Some of the most popular and often-used programs have been expanded over time.
One of the biggest changes was to triple the amount of time homeowners can receive help from the Unemployment Mortgage Assistance Program. Now, out-of-work homeowners can receive as much as $3,000 per month for up to 18 months or $54,000. When the program launched it was capped at six months and $18,000, but program officials soon realized that wasn’t enough due to the staggering amount of Californians who were “long-term unemployed.” Like all of the program changes, the decision to expand was made to better address the challenges homeowners were facing.
The changes to the Principal Reduction Program have been even more significant. Originally Keep Your Home California required a dollar-for-dollar match from mortgage servicers as part of the Principal Reduction Program. For example, Keep Your Home California and the mortgage servicer could each offer a maximum of $50,000 under the program, providing a total of $100,000 for homeowners in principal reduction.
But few servicers enrolled in the Principal Reduction Program, meaning homeowners were unable to get the assistance. So, Keep Your Home California changed the program, and now provides the entire amount—up to $100,000. More servicers signed up for the program, which has allowed many more homeowners to be approved for principal reductions.
Within the last year, officials also announced an effort to assist homeowners with unaffordable mortgages through the Principal Reduction Program. Up until that change, the program was only available to homeowners who had negative equity. This change gave yet another boost to the amount of homeowners who could qualify. In fact, Keep Your Home California approved a record number of homeowners through the Principal Reduction Program in 2015. In 2011, the first year of the program, only 166 homeowners were approved. About 2,800 homeowners were approved in 2015, 17 times the amount of homeowners in 2011.
Another significant program change occurred when Keep Your Home California increased the $25,000 limit to $54,000 for the Mortgage Reinstatement Assistance Program, allowing homeowners to catch-up on their past-due mortgage payments. The data analysis showed that a significant number of homeowners had arrearages exceeding the previous program cap of $25,000 and many of those arrearages increased as the homeowners attempted to work on a loan modification with their servicers. In light of this information, the cap was increased. As has always been the case with this program, homeowners must be able to make their mortgage payments going forward.
In early 2015, Keep Your Home California also introduced a new program to help senior homeowners with reverse mortgages. The Reverse Mortgage Assistance Pilot Program offers as much as $25,000 to help cash-strapped seniors dealing with past-due property-related expenses, such as property taxes and/or insurance.
In addition to program changes, the team at Keep Your Home California also has made changes to increase the availability of assistance, improve customer service, and connect with more homeowners (this blog is just one effort we’ve introduced since the program started).
Keep Your Home California launched with just 10 mortgage servicers – the companies that collect the monthly payments – enrolled in the program. Today, almost 250 servicers participate in the program, from big banks such as Bank of America and Wells Fargo to pint-sized credit unions. With more servicers participating, more homeowners can be considered for assistance.
There have been other changes over time, including a new interactive website featuring a 12-question “Eligibility Calculator” homeowners can take to better understand for which programs they may qualify. The team at Keep Your Home California has been working to keep the programs relevant for the changing landscape when it comes to foreclosure prevention in the state. As the data changes, so too does Keep Your Home California.
One thing that hasn’t changed is that Keep Your Home California’s far-reaching goal and never-ending focus has always been on helping homeowners. As long as there is funding available, the program will help low to moderate income homeowners who have experienced financial hardships prevent foreclosures.
Homeowners seeking more information about Keep Your Home California or any of its five programs should call 888-954-KEEP (5337) between 7 a.m. and 7 p.m. weekdays and 9 a.m. to 3 p.m. Saturdays or visit www.KeepYourHomeCalifornia.org. Representatives can answer questions and take applications in virtually any language through a translation service and there is never a fee for any Keep Your Home California services. A Spanish-language version of the website is also available at www.ConservaTuCasaCalifornia.org.