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  • California Mortgage Help 2012


    Quite honestly, the economy is still in the recovery mode. Because of this – there are people who continue to have problems making their respective payments on their mortgages each and every month. This is especially true in the state of California. Well, the good news is – there is help. California mortgage help is available for those finding it difficult to make their mortgage payments. The key will be to know exactly where to look, and what to look for in terms of your specific financial difficulty.

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    In the paragraphs that follow, you are going to learn some detailed information that pertains to help with your mortgage. After reading through the information provided below, you’re going to have a better understanding of the steps you need to take to get back on track, as well as the programs available that will help you do so.


    The Different Forms of Financial Hardship and the Programs available to Help you Deal with Them.


    The California Housing Finance Agency is California’s main housing agency. It has several mortgage assistance programs designed to both help first-time buyers purchase a home and assist those that already have a home keep it. Those programs designed to protect Californian homeowners from foreclosure are under the Keep Your Home California program, which provides up to $2 billion in cash for foreclosure prevention programs. However, previous eligibility criteria was too stringent to allow many struggling homeowners qualify for assistance. The California’s Housing Finance Agency has reduced the requirements of these programs to help more struggling homeowners benefit from them.

    Unemployed Workers

    Under the new rules unemployed workers who are at risk of losing their homes can request federal mortgage assistance of up to $3,000 a month. Similarly, homeowners who are facing financial hardship can apply for up to $15,000 a family to reinstate mortgages at risk of foreclosure. Even homeowners who have no choice but to let their homes go can apply under the new rules for assistance for relocation expenses. These and many other changes have been backdates to mortgages originated after January, 1, 2009. This means that even if your application for help previously put down, you may reapply and see it approved under the new rules.

    These changes have come after the California Housing Finance Agency collected information on the existing programs and identified the areas where improvements were required. One of the main factors considered were the ongoing high-rates of unemployment in California which increased the risk of households, which had previously being regular with their mortgage payments, would lose their homes to foreclosure.

    The California Housing Finance Agency acts  as an intermediary between the Housing and Urban Development and servicers in some programs and as principal program manager in others. The servicers used by the CalHFA include the Guild Mortgage, GMAC, the California and the Department of Veteran Affairs. Funding for the programs originates from the Housing and Urban Development Department and the Dodd-Frank Act. Funds of up to $1 billion have been assigned to unemployed workers struggling to pay their mortgage and over $450 million will go to the State of California. Other states that have relaxed the eligibility criteria of their mortgage assistance programs and will receive assistance from the Dodd-Frank Act include Delaware, Idaho, Pennsylvania and Maryland.

    One of these programs, is the Emergency Homeowner Loan, which is available for unemployed workers who had an income of 120 percent the median income and who had seen their income drop by at least 15 percent since they lost their job.

    Do you know what a mortgage servicer is? Many borrowers do not know that the company which receives their monthly payments and sends nasty letters when they are behind on their payments is often not the company or investor that sold them the mortgage in the first place or even the current investor. In the mortgage industry there are three main players, mortgage originators, mortgage servicers and mortgage investors. Mortgage investors put forward the money for the loan, mortgage servicers handle the payments and communication with the borrowers and mortgage originators sell the mortgage. In some cases, all three roles are played by the same company but often these roles are split between specialized companies.

    Of course, throughout the life of your mortgage fees are paid to the companies that manage your mortgage. The origination fee you pay when you sign for a mortgage is part of the payment mortgage originators receive. Every month interest is paid to the mortgage lender and a portion of the interest and mortgage fees goes to the company that manages your payments. These fees do not stop when you are behind in your payments and you are applying for a mortgage modification.

    Mortgage modifications are paperwork intensive procedures which require a lot of research and communication between borrowers, mortgage servicers and mortgage lenders. This may help you understand why mortgage modifications often take so long to get processed even when borrowers clearly qualify for them. Mortgage servicers receive a fee for their work during mortgage modifications. However, the rules that regulate how much they receive have just been changed.

    Fannie May requires mortgage servicers to only charge a fee, if the loan modification is approved. That has been the case for some time now. However, how much mortgage servicers can charge has recently changed. Why? Fannie Mae states recent simplifications in the mortgage modification process as a basis for the reduction in fees charged by servicers under the government sponsored mortgage assistance programs. The current limit is 0.25 percent of the mortgage amount or whatever the mortgage servicer received before the loan modification.

    The maximum allowed servicing fee for mortgage modifications is not the only change announced by Fannie Mae. Mortgage investors and mortgage servicers must also adapt to changes in foreclosure time frames and rules on mortgage delinquency management. Now, if mortgage servicers exceed the allowed time frame to assess a loan modification, Fannie Mae will impose penalties so servicers remediate the problem and improve their performance.

    MassachusettsMassachusetts, like most states, was hit hard during the 2007 to 2010 housing crisis and is still feeling the effects of the recession. Unemployment is high, at 8.2 percent, with over 288,000 people unemployed. However, there is good news. All the main industry sectors, including construction, financial activities and professional and business services are reporting modest but significant improvements.

    However, the foreclosure figures are far from modest, they are excellent. Only one in every 1,749 homes received a foreclosure in January 2011. Nevertheless, that still means there are 19,230 homes that are currently under foreclosure.

    The government has set a variety of government programs to provide help to homeowners in Massachusetts. In this article we will look at one of these special programs, the New England Mortgage Relief Fund.

    This fund is sponsored by five banks: Citizens Bank, Webster Bank, Bank of America, TD Banknorth and Sovereign Bank, which are working together with the Federal Reserve Bank of Boston to help homeowners save their homes from foreclosure.

    Eric Rosengren, CEO of the Boston Federal Reserve Bank recently praised the Mortgage Relief Fund and the banks that back it for their work in assisting financially troubled homeowners.

    Up to date, the banks have committed $125 million towards the relief fund. Although significant, this amount does not reflect the magnitude of the problem faced by thousands of homeowners. Just between Connecticut and Massachusetts there are over 25,000 homes in foreclosure, and that does not include the other four states in New England.

    The fund does not aim to help all struggling homeowners. It focuses on borrowers who are loaded with high interest mortgage payments for homes that are worth less than their mortgage balance, but have good payment histories on their credit history. This initiative seeks to provide refinance loans and loan modifications for responsible borrowers who have who are in financial difficulties. This subgroup of borrowers represents up to 25 percent of subprime borrowers in New England. Subprime loans include loans with interest rates which are much higher than current interest rates. Because their homes are not worth as much as their mortgage balance, many borrowers are locked into their mortgage even though they have good credit and could otherwise refinance their mortgage to lower interest rates.

    It is encouraging to see how competing banks have united behind this program. The money committed to the fund is used for shared advertising and other running costs of the program.

    If you want to apply for this government sponsored mortgage help program visit www.mortgagereleieffund.com or contact your bank and ask if you qualify as a beneficiary of the Mortgage Relief Fund.

    reversemortgageA panel of three judges in California ruled against a bank who promised to start loan modification negotiations in exchange of the borrower lifting their motion for bankruptcy and then failing to do so.

    This is good news for homeowners nationwide who are also suffering from the underhandedness of some servicers and lenders. The decision opens the way for further lawsuits against lenders who make a practice out of being less than truthful with their clients and even places a question mark on many of the foreclosures that are currently in process. Understanding what happened in this case is a good case example of how the law can protect you from greedy and dishonest lenders.

    Claudia Aceves purchased a mortgage with Option One Mortgage Corporation to purchase a $845,000 house. The increase in her mortgage’s adjustable rate made the monthly payments unaffordable. She filed for bankruptcy under chapter 7, which would allow her to discharge the debt on her home. However, her husband offered to help financially and she changed her bankruptcy application to a chapter 13 bankruptcy, which would allow her to adjust her debts, create a repayment plan and keep her home.

    When the bank heard of this it contacted Aceves’ lawyer and offered to negotiate a loan modification if she lifted her motion for bankruptcy. She did. What Aceves did not know was that her bank had no intention to offer a loan modification and had already taken steps to sell her home in a foreclosure auction. Days before the auction was to occur the bank offered Aceves a unilateral “loan modification” offer that would increase her mortgage balance by $120,000 and her monthly payments up to $7,200. Naturally, Aceves did not accept. She lost her home and sued the bank for not honoring their promise to negotiate a loan modification. The first judge that heard the case failed in favor of the bank, but the Court of Appeals decided a unilateral offer was not a loan modification negotiation and the bank was in breach of contract.

    This decision creates a precedent for other homeowners who are treated in a similar way by banks who wish to unload “bad debts” and force foreclosures on properties on which a foreclosure is financially preferable than a drawn out loan modification the lender may or may not pay.

    If you are facing the possibility of a foreclosure contact HUD, at HUD.GOV and ask for a free foreclosure counseling service. Trained foreclosure counselors can explain what your options are and even help with negotiations with your bank.

    The state of California and the U.S. Government provide borrowers and lenders in California with mortgage aid programs and incentives. Although these programs are not for everyone and are not a silver bullet for all mortgage problems; it is worth spending some time learning about what choices you have and the pros and cons of each program.

    The responsibility of providing mortgage aid in California falls on two main agencies: the California Housing and Finance Agency (CalHFA) and the Obama’s administration Making Home Affordable Plan (MHA). CalHFA focuses on low to medium income first-time buyers and sponsored rentals. MHA focuses on loan modifications, refinances and foreclosure alternatives for struggling borrowers.

    As described in our previous post on California mortgage programs CalHFA provides several mortgage aid schemes to help low income borrowers pay for down payments and closing costs. These two expenses are the reason many borrowers cannot afford to buy a home. Examples of this are the Affordable Housing Partnership Program, which allows borrowers to combine their down payment with their mortgage and closing costs.

    The Making Home Affordable is a comprehensive plan that provides several options to borrowers. Unfortunately the number of borrowers that have qualified for the programs is small in comparison to the number of borrowers facing foreclosure.

    However, as the Treasury department often reminds the media, the goal of the program is not to help everyone, only responsible borrowers that have the income to afford a refinanced or modified mortgage. To encourage borrowers to adjust their mortgages before they become delinquent the MHA plan grants borrowers with $1,500 if they modify their mortgage without becoming delinquent on their payments. This helps borrowers in several ways. It improves their chances of saving their home, reduces the costs related to foreclosure proceedings and improves the likelihood of borrower not becoming delinquent in the future.

    A similar program also sponsored by MHA is the “Stay Current” mortgage incentives. This program gives $1,000 a year for five years to borrowers that pay their mortgage on time after a loan modification. This money is used to pay off the principal balance of the loan which saves borrowers because it reduces the balance on which interest is paid.

    Servicers also receive incentives under the MHA plan. For instance mortgage servicers receive up to $1,000 every year for every borrower who stays current on a loan modification arranged by the servicers. This provided servicers with an extra incentive to help borrowers get modifications they can afford to pay in the long run.

    (Second article of Help for California Series. Read the previous article.)


    California Housing Finance Agency focuses attention on first time borrowers and renters. So whether you are planning to buy your first home or you lost your home and need to find a suitable rental in California this is an agency you will want to visit.

    California Housing Finance Agency home purchase programs include:

    – 30-year fixed mortgage, California Homebuyer’s Downpayment Assistance Program (CHDAP) .

    – The CalHFA Housing Assistance Program (CHAP).

    – The 30-year Fixed – Government Insured/ Guaranteed Mortgage.

    – The Affordable Housing Partnership Program (AHPP).

    – The Extra Credit Teacher Home Purchase Program (ECTP), among others. This article provides a brief description of each program. Please visit CalHFA for more details.

    30-Year Fixed Mortgage Program.

    This is a basic 30-Year first home mortgage created to reduce costs and allow low to medium income homebuyers to purchase their first home in California. This program allows for up to 95% financing of the house value on a long term (30 years) fixed interest that allows for relatively low monthly payments.

    California Housing Assistance Program (CHAP)

    This program provides first time homebuyers with a second loan to pay for the down payment. The payment of this second loan is deferred to allow buyers who can’t afford a down payment to take their first step on the property ladder.

    California Homebuyer’s Downpayment Assistance Program (CHDAP)

    This program is similar to CHAP but is designed for buyers with a moderate income and has more flexible requirements.

    Affordable Housing Partnership Program (AHPP)

    This program partners with local agencies in offering first time homebuyers with help to pay for the downpayment and closing costs. This program can be used with CalHFA’s 40-year loan but you can only get the reduced interest rates if you combine it with a 30-year loan.

    30-Year Fixed- Government Insured/Guaranteed Mortgage

    This program combines a 30-year mortgage with a CalHFA junior loan or second loan to pay for closing costs and downpayments.

    Extra Credit Teacher Home Purchase Program  (ECTP)

    This program is designed for Californian teachers and school staff that are looking to buy a new house. Besides providing a low interest mortgage and help with the downpayment this program can “forgive” the interest on the loan for eligible borrowers.

    As you can see, help is available for those that are willing to look for it. This is not to say that all struggling borrowers or hopeful first-time homebuyers are going to get the help they want. Some cases are lost causes, and need to rearrange their finances before they qualify. However in many cases a little research and investment in time and effort can land you on the mortgage deal you have always wanted.


    California has several organizations and programs to help struggling homeowners get back on their feet. If you are a California resident and you fear you could lose your home this article is for you. If you are looking to buy your first home read on; California has several first-time homebuyer programs also.

    However the first tip you should follow when thinking of refinancing, modifying a loan, or buying a new mortgage is to contact a housing counseling agency. They are agencies approved by the Housing and Urban Development department, and provide free (or low cost) professional advice.  Delaying action could cost your home or at the very least extra costs and fees on your mortgage.

    One of these agencies is the Consumer Credit Counseling Service of San Francisco, which manages the Housing Education Program. This program provides free or low cost education to homebuyers and borrowers through education materials, workshops and personal counseling. Their early delinquency intervention program and post-foreclosure help program are of special interest. For a list of approved housing counseling agencies in California click here.

    Unfortunately the housing crisis we are now suffering does not seem to be going away soon. Layoffs continue, health costs are rising and home prices remain low. This has created a housing “perfect storm” that has affected millions of homeowners.

    Government mortgage aid programs in California focus on two areas: education and funding incentives for lenders. Education is important for lenders because often it is a lack of understanding of the foreclosure process that makes homeowners lose their homes. Obviously sometimes homeowners simply cannot afford their mortgages and their best choice is to find the most graceful way out of their mortgage.

    However, in other occasions help is available and foreclosure can be avoided. This series of two articles will look at three types of California mortgage aid programs: mortgage protection, buying and tax credits.

    CalHFA is one of the main mortgage aid providers in California. Set up in 1975; it has been around through various housing crisis. It is a State chartered affordable housing bank designed to offer affordable low interest loans. The agency can afford to offer the service thank to the sale of tax-free bonds, which are repaid with the interest of mortgage loans. No tax dollars are used to fund the agency.

    Home Openers mortgage protection program is automatically included with every CalHFA mortgage at no extra cost. The free service covers your mortgage costs if you involuntarily lose your job and are receiving benefits from the California Employment Development Department and are making an effort to look for work. These payments will be covered for six months, giving you time to rearrange your finances. This forbearance period of six months is an excellent safety net you can use to arrange your loan modification if you think your situation will continue.

    Learn about more mortgage aid programs in the second article of this series.

    Flag_of_California.svgGovernor Arnold Schwarzenegger signed the California Foreclosure Prevention Act (CFPA) on February the 20th 2009. The Act is designed to encourage lenders and mortgage servicers to provide loan modification programs to borrowers.

    The Act extends the foreclosure process in California by 90 days. This provides borrowers with three more months to put their finances in order and find a way to avoid foreclosure. Mortgage providers can apply for an exemption from this extension to the State department. The state department provides exemptions to lenders and mortgage servicers that have a comprehensive loan modification program for borrowers. This program must provide help to borrowers and be designed to avoid foreclosure and help borrowers save their homes. The Act gives lenders an extra incentive to keep borrowers in their homes.

    Who qualifies for this extension? Everyone qualifies, unless your lender is granted an exemption. The Act is aimed at servicers not borrowers. Generally borrowers will qualify for the extension as long as:

    a)      The lender has not received an exemption because it has a loan modification program.

    b)      The loan was signed between January 2003 and January 2008.

    c)       The loan is the primary or first mortgage on the property.

    d)      The borrower lives in the property.

    e)      The borrower is not filing for bankruptcy.

    These points highlight two important points you should consider carefully when deciding what to do when you are behind on your mortgage payments.

    First do not leave your home regardless of what your lenders says. Until your house is placed on auction and sold and the forbearance period has ended you have the right to live in your home. Use it. The moment you leave your home you give up certain rights and are no longer eligible for certain mortgage programs aimed at borrowers that live in the mortgaged homes.

    Second, don’t jump into filing for bankruptcy unless it is your last chance of saving your home and it is worth saving. Always talk to a bankruptcy lawyer before you make that decision. A bankruptcy will stop in their tracks any loan modification programs you might be in or had the choice of applying for. It also has long-term effects on your credit score. It will stay on your credit score for at least ten years making it difficult for you to get a loan in the future.

    The California Foreclosure Prevention Act gives lenders and mortgage servicers 90 more reasons to provide loan modifications to struggling homeowners. However, the chances are you have many more questions on the Act. Does this mean every loan in California should receive a loan modification? What time frame does a lender have to apply for an exemption? Or where can I find more information on the content of the Act? We will answer these and other questions in the next article of this series.

    Flag_of_California.svgThe California Foreclosure Prevention Act (CFPA) was advertised as a bold and revolutionary measure to encourage lenders to help borrowers. Has the Act provided the help borrowers hoped for and still need?

    The answer depends on what your expectations were. The Act is just one more measure the government, state and federal, is using to reduce the number of foreclosures. It encourages mortgage servicers to provide a loan modification program; it does not specify who should receive the loan modifications, or what loan modifications should be offered. Foreclosures have continued to rise in California, but more banks and lenders have a loan modification program borrowers can apply for.

    In part because of this Act the list of mortgage loan servicers that provide loan modification programs has grown to include most national and local banks. You can check if your lender has received an exemption from the state department by visiting www.corp.ca.gov. If your lender is not on this list you automatically qualify for a 90-day extension on your foreclosure. If your lender is on the list you know there is a comprehensive loan modification program you can qualify for.

    Remember that in most occasions a loan modification is in the interest of both you and your lender. The housing market now is a buyer’s market and lenders are finding it difficult to sell foreclosed properties. However, a loan modification can give homeowners a way to save their homes and lenders a chance of saving their investment.

    However, sometimes lenders will claim to have a loan modification program, but will not comply with it, or make it impossible for borrowers to get a suitable loan modification. If this is your case contact California’s Department of Corporations at 1-866-ASK-CORP and report your complaint of noncompliance with the California Foreclosure Prevention Act. The Department of Corporations will tell you which state department is responsible.

    This does not mean every borrower will, or even should, receive a loan modification. Some mortgages are beyond help, and probably should never have been granted. If you do not have any income, do not expect to find a job any time soon, and otherwise cannot afford reasonable mortgage payments you will probably not qualify for a loan modification. However, even in these cases the Act requires lender to provide alternatives to foreclosure that protect you from some of the negative effects of foreclosure, and allow you to cancel your mortgage more gracefully.

    Anyway, whether you feel you are eligible for a loan modification or not, contact a federal or state approved housing counselor and ask for advice. Please find below a list of approved housing counselors in California as of June 2010. For an up-to-date list of housing counselors visit www.hud.gov.

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