Sometimes change is good, especially when it provides as much as $100,000 in principal reduction for underwater homeowners


Keep Your Home California officials are always looking to improve the free mortgage-assistance program for hard-hit homeowners. The program has undergone many changes since starting in February 2011. The next four blog posts will detail many of these program changes – and how they help homeowners.

California’s housing market continues to improve, with double-digit price increases every month for the past 24 months (as of February 2014).

Despite the dramatic gains, many homeowners are still upside down or “underwater” on their existing mortgage, meaning they owe more than their home is worth. In fact, according to a recent CoreLogic report, nearly one out of every eight California homeowners with an existing mortgage owes more than the value of their home. In some regions, such as the Central Valley and Inland Empire, the percentage of homeowners with underwater mortgages is much higher.


Keep Your Home California – a federally funded, state managed program – could help homeowners reduce their principal by as much as $100,000. The assistance provided through the Principal Reduction Program can get homeowners closer to being right-side-up on their mortgage. An improving economy and housing market could do the rest to return homeowners to a positive equity situation.

Since it started in February 2011, the Principal Reduction Program has undergone many changes with the goal of helping more homeowners who are struggling with their underwater mortgages.

For example, a dollar-for-dollar match requirement from mortgage servicers was eliminated in late 2012. This change was made to attract more mortgage servicers – mission accomplished (see below) – and make more homeowners eligible for the program.

In November, Keep Your Home California officials made another major change – a loan-to-value ratio of 140% or greater qualifies as a financial hardship, opening the door for more homeowners to apply for the Principal Reduction Program.

It’s a big change since homeowners must demonstrate a financial hardship in order to qualify for any of the four Keep Your Home California programs. Other types of qualifying financial hardships include a job loss, a decrease in income, a divorce, extraordinary medical expenses, etc.

These changes have allowed the free program to assist many more homeowners. Keep Your Home California approved 1,619 homeowners for the Principal Reduction Program in 2013, a huge increase from the 940 homeowners during the previous two years, combined. The $158.4 million in total Principal Reduction Program funds that were provided by the end of 2013, represented a 384.1 percent increase from the end of 2012.

Homeowners are also being approved faster – about 70 days during the fourth quarter, compared to 110 days since the program started. The average homeowner approved for the program received $77,000 in principal reduction – and enjoyed a 23 percent drop in their monthly mortgage payment, saving about $360 per month.

There are some additional requirements to qualify, including meeting the county-by-county income limits – from about $69,000 to $126,000 – and the homeowner’s mortgage servicer must participate in the program.

Currently, about 120 mortgage servicers – including Wells Fargo, Bank of America, Chase and Citibank – are enrolled in the Principal Reduction Program. In comparison, only 11 servicers participated in the principal reduction effort in December 2011.Change has been good for Keep Your Home California – and the thousands of homeowners who have benefited from the mortgage-assistance program. And officials will continue to look at new ways to improve the program.

If you have additional questions, would like more information or want to apply for the program, call 888-954-KEEP (5337) or visit  (Spanish speakers should visit

The counseling center is open 7 a.m. to 7 p.m. weekdays and 9 a.m. to 3 p.m. Saturdays.  Translators are available, so counseling sessions can be conducted in virtually any language.

Image courtesy of ddpavumba /