California homeowners to get 1.2 billion in help, The Daily News

California homeowners to get 1.2 billion in help, The Daily News, Sept 16, 2010

By Troy Anderson

With as many as one in five California homeowners behind on mortgage payments, nearly $1.2 billion will become available Nov. 1 to help low- and moderate-income families stay in their homes, officials said Wednesday.

Administered by the California Housing Finance Agency, the Keep Your Home program will provide funding for home-loan modification programs to help troubled mortgage holders. The plan calls for the money to be paid to banks and other lenders to cover the costs of reducing a borrower's principal, along with an incentive for participating in the program.

The federal government provided CalHFA with $700 million to help homeowners who are suffering a financial hardship and are in danger of losing their homes. A separate allocation of $476 million is earmarked for unemployed and underemployed homeowners who are at least three months behind on their loans.

"The foreclosure crisis in California is serious enough that the federal government has allocated this money to California as one of the five hardest-hit states," CalHFA Program Director Linn Warren said Wednesday after a board of directors meeting at the Burbank Airport Marriott Hotel.

"I think it's sufficiently serious that we were among the first recipients of these federal funds. Currently, the percentage of homeowners who are delinquent on their mortgages ranges from 10percent to upwards of 20percent or more in certain areas."
Warren said he expects the money to help 80,000 borrowers over the next three years.

Arleta resident Angel de la Torre, a 41-year-old construction worker, said he plans to apply for the Keep Your Home program because it's difficult to find enough work to pay his mortgage.

"It's difficult because right now I don't work five days a week," said de la Torre, a married father of four children. "Sometimes, when I work enough, I can make the payment. It's really hard. Sometimes, you think, `Do I send the payment or bring food to the table?"

To seek help under the Keep Your Home program, Warren said, homeowners should contact their lenders and tell them they are having trouble making their mortgage payments.

"Ask, `What programs do you have available that will help me stay in my home?"' Warren advised. "That may be the federal Making Home Affordable program or our Keep Your Home program.
"The best question homeowners should ask is, `How can you help me and what programs do you have available?"

Information about various options is available at www.calhfa.ca.gov.
More than 100 homeowners attended the hearing in Burbank, where board members got an update on the Keep Your Home program.

Despite the good intentions of the program, some of the speakers spoke out against some provisions of the deal.
Yvonne Mariajimenez, deputy director of Neighborhood Legal Services in Pacoima, said the CalHFA program is designed to "bail out its own portfolio and line the pockets of the banks" rather than serve homeowners.

Mariajimenez said the program will leave homeowners with severe negative equity after a CalHFA modification. She also said the program will exclude those homeowners targeted by predatory lending schemes and those who have previously refinanced their mortgages or obtained home equity loans.

"Statistics show that 65 percent of all people in foreclosure refinanced or took out home equity loans," Mariajimenez said. "There is the perception that people refinanced to buy yachts, go to Vegas or take a fancy trip. But we hear story after story of people who took out money to survive and pay medical bills."

In a letter to CalHFA, Mayor Antonio Villaraigosa wrote the agency plans to pay banks 50 cents or more for every dollar of principal reduction while the federal government argues "under water" mortgage debt is only valued at 6 to 21 cents on the dollar.

"Under the CalHFA proposal, limited resources should be used efficiently to impact the highest number of homeowners," Villaraigosa wrote.

In another letter, City Controller Wendy Greuel also described the plan as a "windfall to the banks" that will waste taxpayer funds.

"This failure to seriously address homeowners with severe negative equity promotes the instability of our housing market and is likely to result in homeowners eventually defaulting and losing their homes to foreclosure," Greuel wrote.

Dustin Hobbs, spokesman for the California Mortgage Bankers Association, said it supports the plan.
"It's one more tool in the toolbox to help homeowners stay in their homes," Hobbs said. "It's not going to be a silver bullet, but it will certainly help a significant amount of borrowers, and that's a good thing."