It appears as if California has done it again. Effective a few weeks ago, November 1, 2010 (or so they claim), California began to offer another program for homeowners who are underwater or who are having trouble making ends meet. Some may wonder why California? I’m sure it’s not because Californians have lots of excess money to throw around. In fact, if you have been following the news in our state, you would know that Meg Whitman lost in the gubernatorial election and spent about 140 million dollars doing so. It’s a federally funded program for states like California who are weathering the foreclosure crisis with poise and composure (read: sarcasm).
The federal funding for this plan has amounted to about two billion dollars, which, according to the Los Angeles Times, would be enough money to aid approximately 100,000 homeowners.
Sadly, however, like many other federal programs, this program is short on cooperation on the part of the major lending institutions. Of the three major mortgage-servicing companies (Bank of America, Wells Fargo, and JP Morgan Chase), only Bank of America has stated that it will participate in the principal reduction component of the Keep Your Home program. Yet, Bank of America has not yet signed any formal agreement. It is interesting to note that Fannie Mae and Freddie Mac will not be participating in the principal reduction part of the plan.
The Keep Your Home program uses federal funds and is intended for low-income and moderate-income property owners. To qualify in San Diego County, a family of four would need to have earnings of less than $90,600.
The largest component of the plan will provide $875 million dollars in temporary aid to borrowers who have seen reduced income or job loss. The program can provide up to $3,000 a month for a period of six months to be used for mortgage payments, insurance, and HOA.
Another second component of the program could provide up to $15,000 to help borrowers to become current. And, for those who cannot afford to stay in their homes, the program may provide assistance with moving expenses. According to the news, the majority of major lending institutions (including Fannie Mae and Freddie Mac) state that they will participate in these parts of the plan.
Apparently, the most controversial part of the Keep Your Home California program involves the $790 million that is dedicated to principal reduction.
If you are wondering why lenders might participate, it is because the program pays lenders $1 for every dollar of mortgage debt forgiven. The philosophy behind the program is that reducing the principal would go far towards reducing foreclosures because home values have fallen so much that homeowners are tempted to walk away from their obligations.
To learn more about the program, visit http://www.keepyourhomecalifornia.org But, don’t expect to get details on how to apply or be considered for the program. The website’s home page clearly states “CalHFA is not taking applications or maintaining waiting lists for the Keep Your Home California programs at this time.”
All I can say about that is… what else is new?
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