Homeowners in California may now have a new loan modification option to help them avoid foreclosure. The $2 billion program is called Keep Your Home California and is paid for by part of the Stimulus Fund. The state is experiencing an ongoing foreclosure crisis, and this program will attempt to hep approximately 100,000 struggling borrowers avoid losing their home. The plan offers some unique features and generous financial benefits for those homeowners who are eligible.
Keep Your Home California Loan Modification Eligibility:
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Primary Residences only are allowed to participate - no investment properties or second homes Borrowers may only own one home The subject loan cannot have been a cash out transaction Income restrictions apply - this is targeted for low-to-middle income families A maximum benefit of $50,000 per household participating
The largest chunk of funds will go to temporary financial help for borrowers who have lost part of their income or who are unemployed, and will provide as much as $3000 a month for 6 months to cover house payments. Another large part of the plan provides money for lenders to write down and reduce the principal balance for those homeowners who owe more on their mortgage than their home is currently worth. This principal reduction component would pay lenders $1 for every dollar of mortgage debt forgiven.
There is also a part of the plan that allows for as much as $15,000 for each household to help borrowers get current on their mortgages so that they can get a fresh start. Lastly, there are monetary payouts available to those homeowners who need to transition from home ownership for moving expenses. This program is voluntary and the state is still waiting for the major lenders to sign up to participate in the plan. So far, only Ally Bank has formally agreed to the program.
Homeowners who would like to participate in Keep Your Home California will need to prepare a loan modification application and prove that they are eligible for approval. A detailed financial statement will be required, and this includes an accounting of the household monthly income, monthly expenses and bank balances. A financial hardship explanation letter will also be required to be supplied by the homeowner. This loan modification plan is a great new option for borrowers in California, it is just up to the borrower to make sure that they apply correctly in order to benefit.
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