Got an adjustable-rate mortgage with a hard-to-make payment? Keep Your Home California and your mortgage servicer could help – and likely save you money

Adjustable-rate mortgages are so 2008. You know, when the housing boom went bust, leading to more than 1.1 million California households to enter foreclosure.

But guess what? As many as 10% of California homeowners still have adjustable-rate mortgages, according to industry experts.

Now, adjustable-rate mortgages aren’t necessarily bad financial tools. They allow some home-shoppers to qualify for loans and become homeowners, and much-tougher regulations have reduced their risk and volatility in recent years.

But when adjustable-rate mortgages were coupled with subprime mortgages – higher-risk, lower lending standard loans – during the housing boom, they created some major trouble. In fact, about 90% of subprime mortgages were adjustable-rate loans in 2006, compared to a historic average of only 8%, according to mortgage experts.

The combination created a hard-to-imagine and impossible-to-maintain situation. It was like bloated water balloons being tossed higher and higher, they were eventually bound to burst when they hit your hands.

And they did for many homeowners, as payments increased as part of the mortgage meltdown.

Bank Owned

Still, tens of thousands of homeowners in California are paying and struggling with adjustable-rate mortgages from the mid- to late-2000s. In many cases, these homeowners are not able to refinance their homes for a fixed-rate mortgage, due to a recent financial hardship.

Perhaps their income declined, they’ve been faced with unexpected medical bills, their monthly payment has increased and made the mortgage unaffordable, or they have an underwater mortgage.

Despite the predicament, help is available to qualifying homeowners. If the servicer participates in Keep Your Home California, homeowners may qualify for free-assistance from the program.

The Principal Reduction Program offers as much as $100,000 in principal reduction and often lowers the monthly mortgage payment for qualifying homeowners. If a homeowner’s monthly mortgage payment has become unaffordable due to an adjustable rate mortgage payment resetting to a higher amount, that homeowner could qualify for Principal Reduction Program assistance to bring the payment back down to an affordable level. In some cases, servicers will couple the Keep Your Home California assistance with a servicer-provided loan modification to change the loan from an adjustable rate to a fixed rate.

Rather than the roller coaster-like ride of adjustable-rate mortgages, which follow interest rates, fixed-rate loans offer the same monthly payment. Then, homeowners know what to expect and can plan their spending, while hopefully socking away some dollars in savings.

Homeowners that have an adjustable-rate mortgage and have suffered a financial hardship should consider Keep Your Home California.


On the Participating Servicers webpage, all servicers that have signed up for the program are listed and you can see which offer modifications with the assistance. More than 250 servicers, including Bank of America, Wells Fargo Bank and U.S. Bank, participate in Keep Your Home California.

In order to apply for the state-managed program, homeowners must have a financial hardship, such as a job loss, cut in pay, divorce, death in the family, or extraordinary medical expenses.  Homeowners must also meet county-by-county income limits. Severe negative equity is considered a financial hardship under the Principal Reduction Program.

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