California has decided that people who stripped equity out of their homes deserve taxpayer help after all.
The California Housing Finance Agency said Tuesday that people will no longer be excluded from three of the four Keep Your Home California programs just because they took out a home equity line of credit or did a cash-out refinance.
Keep Your Home California is a state-run program getting $2 billion from the U.S. Treasury's Hardest Hit Fund. It is designed to help low- and moderate-income people who are unemployed or owe more than their home is worth pay their mortgage.
There are four individual programs under the umbrella program. Eligible homeowners can get up to $50,000 in assistance from one or more of the four programs combined.
When Keep Your Home started taking applications in early February, it barred people from all four programs if they had tapped the equity in their homes.
"We knew we didn't have enough money to serve everyone," says Diane Richardson, CalHFA's director of legislation. "We wanted to help people who were in some kind of trouble through no fault of their own, who weren't upside down because they had taken out equity."
Of the roughly 28,000 people who have called the program seeking assistance, about 10,000 were found ineligible. Of those, about 40 percent or 4,000 were turned down because they had taken equity out of their homes.
CalHFA has now decided that people who can't pay their mortgage because they are unemployed or suffered a financial hardship shouldn't be penalized just because they robbed their homes of equity.
Under the new rules, people who took equity out of their homes will be eligible for the unemployment mortgage assistance, mortgage reinstatement assistance and transition assistance programs if they meet all the other program requirements.
These same programs have also been expanded to include mortgages that were originated after Jan. 1, 2009.
The program originally excluded mortgages originated after that date because they also are excluded under the federal Home Affordable Modification Program. "We wanted to be consistent with HAMP," Richardson says.
But CalHFA found that a lot of homeowners in trouble had refinanced after that date and it did not want to exclude them.
Homeowners who took cash out of their homes or whose mortgage was originated after Jan. 1, 2009, remain ineligible for the fourth program, which offers principal reduction.
To qualify for any of the four programs, homeowners must fall below certain income limits ($119,300 in San Francisco, San Mateo and Marin counties; $108,350 in Contra Costa and Alameda counties).
They also must be living in the home and cannot own a second home, but there are no other asset limits. Applicants will not be asked how they spent any cash they took out of their homes or how much they have in bank or investment accounts.
For other requirements, see www.keepyourhomecalifornia.org/eligibility.htm.
Richardson says that "a couple hundred" people have received help from the program and that about 2,000 more are in the final stage of confirming their eligibility.
CalHFA is contacting people who were previously disqualified but would qualify under the new rules. These homeowners can also contact the program at (888) 954-5337.
Some people have been turned down because their loan servicer is not participating in one or more of the programs.
All of the major private-sector servicers - Bank of America, Wells Fargo, Chase, CitiMortgage and GMAC - are participating in the unemployment mortgage assistance plan, which makes mortgage payments on behalf of unemployed homeowners in imminent danger of foreclosure. The plan will pay 100 percent of the borrower's payment, up to $3,000 a month, for six months.
None of those servicers are participating in the principal reduction program, but BofA has agreed to join a pilot program that will start in a few weeks, Richardson says.
This program will provide capital to reduce the principal balances of qualifying borrowers who are underwater, or owe more than their homes are worth. For every dollar the program contributes, BofA will also reduce the borrower's principal by a dollar, Richardson says.
For borrowers who have received no other assistance from Keep Your Home California, this program could reduce their balance by up to $100,000 - $50,000 from the program and $50,000 from BofA.
However, the program cannot reduce loan balances to less than 115 percent of the home's market value and it won't reduce the borrower's debt-to-income ratio to less than 31 percent, Richardson says.
California is one of 18 states receiving money from the Hardest Hit Fund. Each state could set up its own program, within limits. Many never prevented homeowners from receiving assistance because they had withdrawn equity from their homes. However, many also have much less generous payouts than California.
To learn more, go to www.keepyourhomecalifornia.org, then click on Programs.
Reprinted from SFGATE.com the official website of the S. F. Chronicle
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