Celebrating Homeownership Month by helping homeowners

Homeownership is the foundation for today, tomorrow and the future.

Just ask homeowners in California, who enjoy their own piece of the American dream – in Golden State style. Backyard barbecues, binge-watching on the couch, cooking gourmet meals in the kitchen or planting flowers and veggies in the garden are just some of the fun of homeownership.

But homeownership is much more than burgers on the grill or bulbs in the ground.

June is National 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 (property tax is the largest revenue source for the State of California), creating jobs, energizing the economy – and is often a good investment for homeowners over time.

More than 1.1 million foreclosures past decade in California

Keep Your Home California has helped more than 73,000 homeowners stay in their homes, avoid foreclosure, escape negative equity, and get back on their financial feet. The free mortgage-assistance program has allowed these families to continue enjoying the benefits of homeownership.

If these families would have lost their homes, it would have been devastating financially and emotionally. For most of these homeowners, it would take several years before they would have been eligible for a mortgage, if they could even come up with the necessary down payment, which has become increasingly difficult as home prices increase in the state.

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Currently, only one of three families can afford the median-priced home in California, compared to almost 50% in first-quarter 2012. The dramatic decline has taken place in less than five years, according to the California Association of Realtors (CAR).

Being forced to move from a home – either from a foreclosure, deed-in-lieu of foreclosure or short sale – has an emotional effect on homeowners and their families, especially if their children are attending local schools.

More than 1.1 million California homeowners – or the equivalent of everyone in San Jose, the third-largest city in the state –lost their homes during the foreclosure crisis of 2006-2016, according to CoreLogic. In fact, California had 193,000 foreclosed properties in October 2009, or more in that month than 40 other states for the entire past decade.

Homeownership is often a good long-term investment in Golden State

Despite the dark days of the past, many Californians embrace and enjoy homeownership, while many renters dream about becoming homeowners.

“After all we’ve been through, homeownership remains an American value and the cornerstone of our economy,” said U.S. Housing and Urban Development Secretary Ben Carson in a news release on National Homeownership Month. “Today, we recognize the abiding value of owning a home and rededicate ourselves toward ensuring that every hardworking and credit-worthy American enjoys a fair chance at becoming a homeowner.”

Of course, becoming a homeowner is not easy for most Californians, but it’s often a good investment. Fortunately, there are programs available to help potential homebuyers, such as the loan programs offered by the California Housing Finance Agency.

The state’s current median-home price is almost $537,000, the highest level since August 2007. That’s more than double the price in less than eight years.

California Home Prices 1976-2016

The state’s median home price has increased 18 of the past 20 years, though the drops were dramatic at 38% in 2008 and 21% in 2009, thanks to the Great Recession. And there have only been nine down years since 1969, with only two years of price drops of more than 5% (yep, 2008 and 2009).

Hardships hurt everyone, from neighborhoods to state budget

California homeownership, as you can see, has been a good investment. As such, it is important to help existing homeowners remain in their homes to protect that investment – especially in California’s still recovering economy.

Many homeowners were affected by the Great Recession and some areas are still struggling, especially in the Central Valley, High Desert and Northern California. Less than 4% of the homes in Bakersfield, Fresno and the Inland Empire (Riverside and San Bernardino counties) have passed their peak price, meaning many homeowners have underwater mortgages, according to a Trulia report.

And almost 281,500 homeowners in California had negative equity during the first quarter of 2017 and owe more than the current value of their home, according to a new CoreLogic report.

Some of these homeowners are dealing with a hardship – such as a job loss, cut in pay, divorce, death in the family, extraordinary medical expenses or even an unaffordable or underwater mortgage (or both) – and could apply for Keep Your Home California.

The federally funded, state-managed program helps homeowners with what is often their largest investment, ensures stability for their families and neighborhoods, and even protects funding for local governments and the state.

A recent economic impact report found that Keep Your Home California preserved $2.5 billion in economic activity statewide, from property and sales-tax revenue to jobs. Basically, for every dollar the federally funded program issued, $2 of economic activity was preserved.

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Keep Your Home California is committed to helping low- to moderate-income homeowners to remain in their homes. Homeowners must have a financial hardship, such as a job loss, cut in pay, divorce, death in the family or extraordinary medical expenses in order to qualify for assistance.

In addition to the financial hardship, homeowners must meet county-by-county income requirements and their mortgage servicer – the company that collects the monthly payment – needs to participate in Keep Your Home California.

Homeowners interested in learning more or applying for the program should call the counseling center at 888-954-KEEP (5337) or visit www.KeepYourHomeCalifornia.org or 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.


I Fell Behind on My Mortgage: How Will This Hurt My Credit?

Editor’s note: Beth Kotz with Credit.com has provided a special blog to explain the effects mortgage delinquency and loss mitigation have on credit.

By Beth Kotz

As a homeowner, your mortgage and your credit rating are inextricably linked. To make sure you maintain solid credit, the best thing you can do is make your mortgage payments on time each month.

Mortgages have a major impact on your credit rating and even have their own category on a credit report.

So if you’ve hit some financial bumps in the road and are unable to make your next payment, be aware that falling behind does have consequences. While one isolated incident won’t set you back too far, if you’re unable to pay for longer you should know how this will impact your credit and what impact loss mitigation options can have on your rating as well.

Delinquent Mortgage Payments and Your Credit

Mortgage contracts typically include a grace period. If you make a payment just a few days after the due date, it will likely fall within this period. The lender still counts the payment as being on time, so there is no negative effect on your credit. Grace periods are usually 10 to 15 days.

If you miss the due date and the grace period, a mortgage payment will be considered late. According to  Sarah Davies, Sr. VP, Analytics, Product Management and Research with VantageScore, “Becoming 30 days delinquent on a mortgage loan can cause even a high credit quality consumers’ credit score to decline by as many as 100 points.”

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Your lender will report the delinquency to credit reporting agencies. It will appear on your credit report as a “Late 30” note. If you make the payment within 30 days, this note will go away after the next reporting period, and will not cause lasting damage to your credit score.

When mortgage payments are more than 30 days late, however, or when a consumer is repeatedly late making payments, the adverse effects on credit are more serious. Paying your mortgage 90 days late or more will damage your credit score for up to seven years.

If you fall more than 120 days behind on your mortgage, the lender normally considers you in default. You will receive a “Notice of Default” (NOD). A NOD is the first formal action a lender takes in a process leading to foreclosure. Because a NOD is a public document, it will be noted on your credit record and can also cost you in the form of late fees and higher interest rates. However, it is not as damaging as a foreclosure.

When a consumer falls too far behind, the lender can foreclose on the home. If you lose your home to foreclosure, or if you give it back to the lender via a deed in lieu of foreclosure, your credit score will drop by approximately 250 to 280 points. Restoring your credit score to a place where you will be able to secure a new mortgage with a lower interest rate and better terms will take about three years of on-time, consistent payments.

However, foreclosure proceedings typically take months or years and you can still try to work out an arrangement with the lender. If you take the initiative to stay in touch and find an option that will work, most lenders will work with you.

Loss Mitigation and Your Credit

Loss mitigation is a “catch-all” term that refers to any option that will help a homeowner who is behind on a mortgage to get caught up. There are several such options, and they have varying effects on credit.

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If you realize you are faced with a financial problem such as job loss or unexpected medical bills, you can ask your lender for a forbearance. You may need to act immediately as lenders may not grant a forbearance if you are already seriously delinquent on your mortgage. Under a forbearance agreement, you make smaller payments or no payments at all for a period of time. After you resume regular payments, you will also need to make up the payment amount that was skipped during the forbearance. The good news is that a forbearance will not negatively affect your credit.

Another option you may have is a loan modification. Essentially, loan modifications are permanently restructured mortgage contracts. The key feature of a loan modification is that it requires the lender to list the debt as current or paid in full with credit reporting agencies as long as you comply with the loan modification requirements. You should beware loan modifications that don’t present rigorous qualification guidelines as they can actually be debt settlement arrangements – which will hurt your credit.

Loan modifications endorsed by the U.S. government – like the Home Affordable Modification Program (HAMP) – will not impact your credit. If you continue to meet the requirements of the loan modification program, the mortgage will continue to be reported as current and paid in full. Government assistance benefits are not reported to credit bureaus. As such, applying with Keep Your Home California will not affect your credit score.

If you’ve fallen behind on your mortgage, remember that the situation isn’t hopeless. The worst thing you can do is ignore the problem and wait for it to disappear. Be proactive, educate yourself about loss mitigation assistance and contact your lender right away. If you live in California, a great first step is to contact Keep Your Home California to see whether you might qualify for assistance.

Remember, the bank or other mortgage provider does not want your home. Foreclosure is an expensive last resort for the lender. If you take the initiative to keep in touch and do your best to work out an agreement that will bring your account up to date, it will minimize any harm to your credit.

559520_1767301903269_1946830701_n (1)Beth Kotz is a contributing writer to Credit.com. She specializes in covering financial advice for female entrepreneurs, college students and recent graduates. She earned a BA in Communications and Media from DePaul University in Chicago, Illinois, where she continues to live and work.