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.

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