Sternberg Law Group


California Mortgage Relief: Your Essential Guide

20 May 2024 | Mortgage

The Golden State is renowned for its stunning landscapes, thriving tech industry, and diverse culture. However, California is also infamous for its high cost of living, particularly when it comes to housing. If you’re struggling to make your mortgage payments, there’s hope on the horizon. This comprehensive guide will explore California mortgage relief options, eligibility, and the steps you can take to secure assistance.

Table of Contents

  1. Understanding California’s Mortgage Crisis
  2. California Mortgage Relief Programs: An Overview
  3. Eligibility Criteria for Mortgage Relief in California
  4. How to Apply for California Mortgage Relief
  5. Avoiding Scams: Tips for Homeowners Seeking Relief

1. Understanding California’s Mortgage Crisis

Before we delve into the relief options, it’s essential to understand the scope of the mortgage crisis in California. The state’s skyrocketing housing prices, coupled with stagnant wages, have placed homeownership out of reach for many residents. Even those who have managed to secure a mortgage often struggle to make their monthly payments, leading to a rise in delinquencies and foreclosures.

2. California Mortgage Relief Programs: An Overview

Fortunately, there are several programs in place to provide mortgage relief to California homeowners. These initiatives, offered by government agencies and non-profit organizations, can help borrowers reduce their payments, temporarily suspend them, or even forgive a portion of their debt. Let’s explore the different types of programs available and their benefits.

a. Government-Backed Programs

The federal government, along with state and local agencies, offers several mortgage relief programs. These include:

  • HARP (Home Affordable Refinance Program): Allows homeowners with Fannie Mae or Freddie Mac loans to refinance, even if they’re underwater.
  • HAMP (Home Affordable Modification Program): Provides incentives for servicers to modify loans, reducing payments to 31% of income.
  • FHA Streamline Modification Initiative: Offers FHA borrowers the ability to modify their loan with minimal documentation.
  • VA Compromise Sale Program: Allows veterans to sell their home for less than owed, with the VA forgiving the deficiency.

b. Keep Your Home California

One of the most prominent mortgage relief programs in California is Keep Your Home California, a federally funded initiative. This program provides financial assistance to homeowners who have experienced a financial hardship, such as job loss, reduction in income, or increased mortgage payments. Keep Your Home California includes four components:

  • Unemployment Assistance Program (UAP): Provides up to $3,000 monthly for up to 18 months while you’re unemployed or underemployed.
  • Mortgage Reinstatement Assistance Program (MRAP): Offers a one-time payment of up to $20,000 to bring your loan current.
  • Principal Reduction Program (PRP): Matches up to $100,000 to reduce your principal balance.
  • Transition Assistance Program (TAP): Provides up to $5,000 to assist with relocation expenses if you must transition out of your home.

c. Non-Profit and Lender Programs

In addition to government-backed initiatives, several non-profit organizations and lenders offer mortgage relief. These include:

  • National Foundation for Credit Counseling (NFCC): Provides housing counseling and may assist with negotiating modifications.
  • 995Hope: Offers loan modifications, short sales, and deeds-in-lieu through participating lenders.
  • Lender Proprietary Programs: Many banks and servicers have their own in-house modification programs.

3. Eligibility Criteria for Mortgage Relief in California

While California mortgage relief programs offer a lifeline for struggling homeowners, not everyone will qualify. Eligibility typically depends on several factors, including your income, reason for hardship, loan type, and the value of your property. Let’s break down the specific criteria for the major relief programs:

a. Income

Most mortgage relief programs in California have income limits to ensure assistance goes to those who need it most. These limits vary by program and county. For example:

  • Keep Your Home California: Your monthly gross income cannot exceed 120% of the area median income (AMI). This translates to around $8,000 per month for a family of four in Los Angeles County.
  • HAMP: There is no strict income limit, but you must demonstrate a reasonable ability to make modified payments.

b. Reason for Hardship

You’ll need to document a valid reason for your hardship, such as:

  • Job loss or reduction in income
  • Death of a borrower or contributor to household income
  • Divorce or separation
  • Serious illness or disability
  • Distant relocation for work

c. Loan Type and Property Value

Eligibility often depends on your loan type and the value of your property:

  • HARP: Only available for Fannie Mae or Freddie Mac loans.
  • FHA Streamline Modification: Only for FHA-insured loans.
  • Keep Your Home California: Your unpaid principal balance cannot exceed $729,750 for a one-unit property.

d. Current Status of Loan

Your current loan status is also a factor:

  • HAMP: You must be delinquent or in imminent danger of default.
  • Keep Your Home California: You can be current or delinquent, but cannot have completed a bankruptcy.
  • FHA Streamline Modification: You must be current or less than 30 days late.

e. Affidavit of Financial Hardship

For many programs, you’ll need to sign an affidavit attesting to your financial hardship and intention to occupy the property as your primary residence.

f. Property Type

Most programs only assist owner-occupied properties, not investment or vacation homes.

4. How to Apply for California Mortgage Relief

If you’re struggling to make your mortgage payments, applying for California mortgage relief can provide a lifeline. The process may seem daunting, but with the right guidance, you can navigate it successfully. Here’s a step-by-step guide to help you get started:

a. Step 1: Determine Your Eligibility

Before you begin the application process, determine which programs you may be eligible for. Review the eligibility criteria outlined in the previous section. Consider your income, reason for hardship, loan type, and property value. Don’t hesitate to reach out to a non-profit housing counselor for personalized guidance. They can help you determine which programs are the best fit for your situation.

b. Step 2: Gather Required Documents

Mortgage relief applications require extensive documentation. Start gathering the following:

  • Identification: Government-issued ID, such as a driver’s license or passport.
  • Income Documentation: Pay stubs, W-2s, tax returns, and proof of any other income.
  • Expense Documentation: Bills, receipts, and statements showing your monthly expenses.
  • Loan Documents: Your mortgage note, statement, and any modification or forbearance agreements.
  • Hardship Affidavit: A written statement explaining your reason for hardship and how you plan to recover financially.

c. Step 3: Complete the Application

Once you have your documents ready, complete the application. This will typically involve:

  • Online Application: For programs like Keep Your Home California, you’ll apply online through their website.
  • Paper Application: Some programs may require a paper application, which you’ll need to print, complete, and mail.
  • Phone Application: For certain programs, like HAMP, you’ll need to apply over the phone with your servicer.

Be sure to read each question carefully and answer truthfully. Incomplete or inaccurate applications can cause delays or denials.

d. Step 4: Submit Your Application

Once complete, submit your application as instructed by the program. This may be:

    • Online: Through the program’s website.
    • Mail: To the program’s mailing address.
    • Fax: To the program’s fax number.

Be sure to keep a copy of your application and all submitted documents for your records.

e. Step 5: Wait for Review and Approval

After submitting your application, the program will review it. This may take several weeks to several months, depending on the program and volume of applications. Be patient and don’t hesitate to follow up if you haven’t received an update.

f. Step 6: Modification or Agreement

If approved, you’ll be presented with a modification agreement or forbearance plan. This will outline the terms, including your new payment amount, interest rate, and loan term. Carefully review the agreement before signing. It’s a good idea to have a housing counselor review it as well to ensure it’s in your best interest.

g. Step 7: Compliance

Once the agreement is in place, comply with its terms. Make your modified payments on time and fulfill any other obligations, such as completing a three-month trial plan. Failure to comply can result in the termination of your modification.

Applying for California mortgage relief takes time and effort, but the potential benefits are substantial. By following these steps and seeking guidance when needed, you can successfully navigate the process and find the relief you need. Remember, you’re not alone in this journey. Thousands of California homeowners have secured mortgage relief and so can you.

5. Avoiding Scams: Tips for Homeowners Seeking Relief

As a homeowner seeking mortgage relief, you’re in a vulnerable position. Unfortunately, this makes you a prime target for scams. These scams often promise immediate relief, guarantee eligibility, or demand upfront fees. They can leave you in a worse financial position and even lead to foreclosure. Here are crucial tips to help you avoid falling victim:

a. Red Flags

There are several red flags to watch for:

  • Guarantees: No one can guarantee mortgage relief approval. Be wary of any company that promises a specific outcome.
  • Upfront Fees: It’s illegal for any company to charge upfront fees for mortgage relief services. You should not pay any money until services have been completed.
  • Pressure Tactics: Scammers often try to create a sense of urgency to get you to act quickly. Never feel pressured into making a decision on the spot.
  • Unsolicited Offers: Be cautious of unsolicited phone calls, emails, or mailers offering mortgage relief. Hang up, delete, or shred them.

b. Verify Legitimacy

Before working with any company or program, verify their legitimacy:

  • Check for Licensing: Ensure the company is properly licensed. You can check with the California Department of Real Estate or Attorney General’s Office.
  • Research Online: Look for reviews on the Better Business Bureau, Yelp, and Google. Check for any complaints filed with the Attorney General’s Office or FTC.
  • Contact Your Lender: Reach out to your lender or servicer to see if they recognize the program or company.

c. Work with HUD-Approved Counselors

One of the safest ways to get help is by working with a HUD-approved housing counselor. These non-profit counselors provide free or low-cost assistance and can help you navigate the relief process. You can find a HUD-approved counselor on the HUD website.

d. Don’t Sign Anything

Never sign any documents you don’t fully understand. This includes modification agreements, powers of attorney, or contracts for services. It’s a good idea to have a HUD-approved counselor or attorney review any documents before signing.

e. Report Suspected Scams

If you suspect a scam, report it to the Federal Trade Commission (FTC) online or by calling (877) 382-4357. You can also contact the California Attorney General’s Office and file a complaint.

By being aware of the red flags, verifying legitimacy, and seeking help from trusted sources, you can avoid falling victim to mortgage relief scams. Remember, there’s never a fee to apply for mortgage relief, and help is available for free or low-cost. Don’t hesitate to reach out to a HUD-approved counselor for guidance.