Mortgage assistance program questions answered
From SFGate by Kathleen Pender
Tuesday, January 11, 2011
Readers had some good questions about my Sunday column on California’s new mortgage assistance program for unemployed homeowners.
I’ll answer them today, but first this update on the program, which began taking applications Monday.
Four of the nation’s largest mortgage servicers – Chase, GMAC, Bank of America and Wells Fargo – are now participating. CitiMortgage still has not signed up but intends to, a spokesman told me last week.
The program will make up to $18,000 in mortgage payments over six months for unemployed homeowners in California if they meet rather strict criteria and their servicer participates.
The California Housing Finance Agency, which is sponsoring the federally funded program, has just posted a quick screening tool homeowners can use to see if they meet the major requirements at keepyourhomecalifornia.org/qualify.aspx. Homeowners can also call (888) 954-5337 to be referred to a housing counselor who will help determine eligibility for the Keep Your Home California program.
They can also call their mortgage servicer, but from what I’m hearing, the person who answers the phone might not know about the program yet.
If you missed my Sunday column, you can find it at sfg.ly/gOilMF.
Q: Ken M. asks, “I read one piece of info that stated if I have a second mortgage, then I wouldn’t qualify. Is this correct?”
A: If you refinanced your home and took cash out, or took out a home equity loan or line of credit after you purchased the house, you won’t be eligible for the program – no matter how you spent the proceeds.
You will not be disqualified if you took out a second mortgage at the time you purchased the house to help pay for it.
Q: Rick F. of Walnut Creek asks, “I was excited to see the jobless benefit for mortgage holders, but was disappointed when I saw that having a second mortgage or equity loan would disqualify you.
I took out an equity loan to pay for a new roof for the house. Are there any other programs to help ease the worry about losing one’s home?”
A: There are many programs intended to help people struggling to pay their mortgage, but like this one they all have lots of restrictions and usually require the participation of lenders or servicers, who are not always able or willing to cooperate.
Last year, the Obama administration added a program under its Making Home Affordable umbrella for unemployed homeowners. Participating servicers can reduce or suspend an eligible homeowner’s monthly mortgage payments for at least three months.
Homeowners must be eligible for unemployment benefits and cannot be more than three months past due on their mortgage when they apply.
To learn about all the options, talk to a housing counselor approved by the U.S. Department of Housing and Urban Development. To find one, go to sfg.ly/fujUQk or call (800) 569-4287.
Q: Regarding the program’s income limits, J. Cox of Santa Rosa wants to know whether unemployment checks are counted as income and whether you will be disqualified if you are using your savings to pay your mortgage.
A: When you apply, the program will look at your most recently filed tax return, pay stubs, bank statements and credit report to assess your financial situation.
However, to determine whether you exceed the income limit, it will only consider your income – including unemployment benefits – at the time you apply, according to CalHFA. If a spouse or other person is on the mortgage, it will also include that person’s income.
In general, it will not look at your assets – such as savings, retirement accounts or equity in your home – to determine your eligibility.
However, if income from investments shows up on your bank statement and it is substantial, “we will ask you about it,” says a spokeswoman for the agency. “No one document is used to determine income eligibility; it’s a combination of things.”
Q: Rocco B. of Walnut Creek wants to know whether the assistance is “a gift or a loan” from the federal government.
A: “For all intents and purposes, it’s a forgivable loan,” says Diane Richardson, CalHFA’s director of legislation.
The assistance you receive will be recorded as a lien against the property. “If you stay in your home and stay current on your payments, after three years we release the lien,” she says. In that case the assistance will be a gift from the federal government’s Hardest Hit Fund.
If within three years you either sell the home or refinance the loan for more than the outstanding debt on the property, you will have to repay all or some of the assistance you received.
Suppose you get $18,000 in assistance and within three years sell your home for $220,000. If your mortgage balance is $200,000, you will have to repay the full $18,000. But if your balance is $210,000, you will only have to repay $10,000.