402,000 homeowners faced with underwater mortgages in California

Imagine everyone in Oakland dealing with a financial headache, one that can affect everything from their buying power to retirement plans?

That’s the far-reaching effect of negative equity in California.

Sure, the housing market has enjoyed a big-time boom—the median-home price is at the highest level in seven years—and many homeowners, especially those who bought in the past few years in the Bay Area and Southern California, are money ahead.


But hundreds of thousands of homeowners—about 402,000—are dealing with an underwater mortgage, where they owe more than the current value of their home, according to the latest Zillow report.

We want to put that in some kind of perspective. It’s the equivalent of everyone who crossed the Golden Gate Bridge during the past three days. Or each traveler who passed through Los Angeles International Airport during the past two days. Or every person who entered Disneyland during the past 10 days.


And if you’re dealing with an underwater mortgage, even the happiest place on earth can be difficult to enjoy. Just ask the one of every eight homeowners with a mortgage who is faced with negative equity in the Golden State.

Many of these homeowners bought at the peak of the housing market – between 2005 and 2008, depending on the region – with little or no down payment. Now, they are faced with an underwater mortgage.

In fact, California homeowners have a combined $59.5 billion in negative equity, or about $68,000 per homeowner. And the chance that many of them will dig out anytime soon is unlikely.

‘Continuing to make monthly payments on an underwater home is like renting’

Certainly, the situation continues to improve, especially as home prices rise.  For example, fewer than 3% of homeowners with mortgages in San Francisco are underwater. And only 6.5% in Los Angeles County – though the county has the most underwater mortgages at 75,411, with a combined total of $14 billion in negative equity.

Bakersfield sign 5_12-12

But drive two hours east of the Bay Area or two hours north of Los Angeles and the situation is much different. Madera and Kern counties are dealing with 16%-plus rates of underwater mortgages, respectively. Negative equity is a problem throughout much of inland California, with double-digit rates – and several counties top 19% (Lassen County has the highest rate in the state at 24.8%).

It could be a very long time before these homeowners escape negative equity—or get right-side-up, says Southern California mortgage consultant Greg Cook.

“Continuing to make monthly payments on an underwater home is like renting, but with the interest mortgage deduction,” he says. “And if one of those pesky ‘life events’ happen (such as a divorce or job loss) and they’re forced to sell, it’s either foreclosure or short sale, which puts subsequent homeownership out of the question for three to seven years.”


Than Merrill

Now, if homeowners are making their mortgage payments on time and have no plans to sell, then negative equity is not much of a problem, says Than Merrill, a national real estate expert who founded CT Homes LLC and was a host of A&E’s Flip This House.

“Whenever you are confronted with a debt that exceeds the home’s value, otherwise known as negative equity, your financial position on the asset will take a hit,” Merrill says. “However, the fact that you are underwater may not impact your situation as you may have originally anticipated, especially if you have no intentions of moving anytime soon. As long as you are OK paying considerably more than the home is worth, and can afford to continue to do so, your finances should remain intact.”

As much as $100,000 available to help homeowners with underwater mortgages

For homeowners who aren’t OK paying considerably more and want to escape an underwater mortgage, Keep Your Home California is a possible solution. The free mortgage-assistance program’s Principal Reduction Program offers as much as $100,000 to low- and moderate-income homeowners dealing with underwater mortgages.

So far, more than 9,100 homeowners have been approved for the Principal Reduction Program, receiving about $548 million since February 2011. Many of those homeowners were dealing with an underwater mortgage.


The average homeowner has received $60,220 from the Principal Reduction Program since early 2011. For many homeowners, the program offers another benefit—lower monthly payments. The average homeowner approved for the Principal Reduction Program in the second quarter of 2016 saved almost $260 per month.

Now, homeowners must meet county-by-county income requirements and have experienced or continue to suffer from a financial hardship—such as a job loss, cut in pay, divorce to extraordinary medical expenses—to be eligible for Keep Your Home California. The homeowner’s mortgage service, the company that collects the monthly payment, must participate in the program. About 250 mortgage servicers, including Bank of America and Wells Fargo, 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 eligibility requirements protect taxpayer funding

If a close relative trusted you with a lot of money and wanted you to spend it wisely, you would feel a sense of duty and responsibility, right?

Well, that’s the situation for Keep Your California.

Uncle Sam – also known as the U.S. Treasury Department – has issued $2.36 billion to Keep Your Home California during the past five years, with the funds reserved to help homeowners who are struggling with their mortgages due to a financial hardship.

The goal has always been to help prevent avoidable foreclosures and ensure that homeowners who receive assistance are repositioned in a way that ensures they will be able to make their payments going forward. The ideal outcome is to stabilize communities for the long-term, not simply kick the can down the road.

However, an equally important goal for Keep Your Home California is to be good stewards of the federal funds – your tax dollars.

piggy bank

It’s a commitment that program officials take very seriously. Keep Your Home California established four programs in 2011, allowing low to moderate income homeowners to catch-up on past-due amounts, have their monthly payments made for them while they are out of work, or even reduce their outstanding balance and cut their mortgage payments – all for free.

The state-managed program has been a huge success, with more than $1.5 billion already provided or scheduled to 65,000-plus California homeowners. The program has enjoyed record quarters for funding issued during the past year.


Many homeowners still need Keep Your Home California. And, Keep Your Home California is here to help.

At the same time, the federally funded program must ensure that homeowners meet eligibility requirements, from county-by-county income limits to an identifiable financial hardship, such as a job loss, cut in pay, divorce, death or extraordinary medical bills.

In addition, Keep Your Home California must consider factors to evaluate the affordability of the home, so that there are reasonable assurances the homeowners will remain in their home after the assistance is provided. If a homeowner is behind and cannot afford their monthly payment, it does not make sense to use program funds to catch them up, only to have them fall behind again.


Keep Your Home California eligibility criteria helps to make sure homeowners are left in a sustainable situation, as evidenced by the fact that 93 percent of homeowners who receive assistance are still in their homes two years later.

The standards that have been set to identify qualified homeowners are not meant to be a barrier to accessing the assistance. Rather, they were established to make sure that program goals are met.

Keep Your Home California must safeguard taxpayer dollars – and the program must be an effective and appropriate use of these federal funds. Some may feel it’s a hassle, but homeowners applying for the program are required to provide documents, like income information and tax returns, in order to show they have suffered a financial hardship and need the assistance.

Applicants cannot be involved in an active bankruptcy and must live in their home. Keep Your Home California was not established to help with income properties or second homes. And, of course, homeowner credit information and mortgage details are collected and considered.

Then, Keep Your Home California and the homeowner’s mortgage servicer – the company that collects the monthly payments – review the collected information to see if the applicant qualifies for assistance.

Senior Couple at Home

It’s much like applying for a mortgage, as it should be, since homeowners approved for the program could receive as much as $100,000 in free mortgage assistance – either from one lump-sum under the Principal Reduction Program or a combination of programs.

Homeowners do not directly receive the dollars; the funds are delivered from Keep Your Home California to the homeowner’s mortgage servicer so the money can be applied to the homeowner’s mortgage as intended. It’s just one more way to ensure funds are used appropriately.

Make no mistake; Keep Your Home California officials want to help as many homeowners as possible, as long as they meet the program requirements.

In fact, Keep Your Home California has expanded the program on several occasions – for example, increasing mortgage assistance from 12 to 18 months for out-of-work homeowners under the Unemployment Mortgage Assistance program – to allow more homeowners to benefit from the program. Keep Your Home California also added the criterion of negative equity equal to or in excess of 120% of the property value as a qualifying financial hardship for the Principal Reduction Program.

Keep Your Home California cannot add, change or modify a program without an extensive review and approval by the U.S. Treasury Department. It’s all about effectiveness, accountability and responsibility.

Finally, every dollar allocated to Keep Your Home California must be used for the program. Funding cannot be used for other programs or the state budget – only Keep Your Home California.


Not everyone who contacts Keep Your Home California will qualify for assistance – and that is not necessarily a bad thing. Eligibility criteria are Keep Your Home California’s first line of defense against people trying to defraud the program. The mission is to help homeowners who are at risk of foreclosure due to no fault of their own and whose options are limited. And, the responsibility to utilize the federal funding to achieve this mission is of utmost importance.

Now that you know how and why Keep Your Home California ensures the funding is being used wisely, learn how the free program can put the money to work for you.

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.

Foreclosure crisis profiteers: Knowing the enemy

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.


Foreclosure crisis profiteers (Part 2): Seeing through the camouflage

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:

If you suspect fraud or misrepresentation related to Keep Your Home California, please contact our Compliance Unit at complianceunit@kyhca.org.

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.


Celebrating five years of helping homeowners

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.




Employment Development Department, Keep Your Home California team up to connect with more than 1 million out-of-work Californians about Unemployment Mortgage Assistance Program

California’s economy continues to improve, with more than 1.53 million jobs created since the recovery started in early 2010 – and the lowest unemployment rate in more than six years.

Despite the solid job growth, many Californians are still struggling to find work. In fact, there are still 1.32 million Californians looking for work – the equivalent of everyone in San Diego.

And many of those folks are homeowners.

KYHC-EDD flyers

So, the Employment Development Department and Keep Your Home California developed a joint effort to educate out-of-work homeowners about the free mortgage-assistance program. Keep Your Home California’s Unemployment Mortgage Assistance Program offers as much as $3,000 per month for 18 months to homeowners eligible for unemployment benefits.

EDD delivered nearly 1.5 million flyers about Keep Your Home California to jobless residents in the state in 2014. The campaign has been a big help in educating and encouraging homeowners to apply for the state-managed program.

The Unemployment Mortgage Assistance Program augments jobless benefits from the EDD. So, homeowners can collect an unemployment check and have their mortgage payments covered – up to $3,000 per month – for up to 18 months.


The Unemployment Mortgage Assistance Program allows out-of-work homeowners to concentrate on their job search, rather than worry about their monthly mortgage payment. The program has already helped more than 34,000 homeowners across the state.

To qualify, homeowners must meet county-by-county income requirements, and their mortgage servicer must participate in Keep Your Home California. All 200-plus mortgage servicers enrolled in Keep Your Home California participate in the Unemployment Mortgage Assistance Program, including Bank of America, Wells Fargo, Chase and several other large servicers. To check the complete list of mortgage servicers enrolled in Keep Your Home California, visit: http://keepyourhomecalifornia.org/participating-servicers/.

If you would like more information or want to apply for Keep Your Home California, call 888-954-KEEP (5337) or visit www.KeepYourHomeCalifornia.org (Spanish speakers should visit http://conservatucasacalifornia.org/). 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.

Transition Assistance Program offers $5,000 to families looking for a fresh start

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. This is the final of four posts that detail many of these program changes – and how they help homeowners.

From assisting out-of work homeowners to those struggling with significantly underwater mortgages, Keep Your Home California focuses on helping Californians prevent avoidable foreclosures, oftentimes helping them stay in their homes in the process.

But the mortgage-assistance program also helps homeowners who, through no fault of their own, are faced with the hard-to-grasp reality of losing their house.

ID-10052201The Transition Assistance Program offers as much as $5,000 to help low- to moderate-income homeowners move to another form of housing — enough money for covering moving costs, a security deposit and in some cases a few months of rent. Basically, the dollars give families a fresh start in a new home.

The Transition Assistance Program was established to be used in conjunction with a mortgage servicer-approved short sale or deed-in-lieu of foreclosure to help homeowners make the move into a new housing situation as easy as possible, whether it’s an apartment, rental house or moving in with relatives.

Of course, there are some requirements, just like the other three programs in Keep Your Home California.

Most notably, the income limit – 120% of the county’s area median income.,. Before you decide that you earn too much, the income limits range from about $69,000 in several rural counties to more than $120,000 in San Francisco and San Mateo counties. You can check the complete county-by-county income limits here (URL to http://keepyourhomecalifornia.org/income-limits/).

Your mortgage servicer – the lender that collects the monthly mortgage payments – must also participate in the Transition Assistance Program. Almost 130 mortgage servicers are enrolled in the program, six times as many as two years ago. Wells Fargo, Bank of America, Bank of the West, Chase Home Finance, and CitiMortgage are among the big-name banks that participate in the Transition Assistance Program. Check the complete list of mortgage servicers enrolled in the program. (URL to http://keepyourhomecalifornia.org/participating-servicers/)

Image courtesy of Vichaya Kiatying-Angsulee / FreeDigitalPhotos.net