Principal relief for stressed homeowners
A limited number of underwater homeowners in California will soon be able to
get principal reductions of up to $100,000 apiece on Fannie Mae and Freddie Mac
loans through the federally funded Keep Your Home California Program.
Making sense of the story:
- Although the federal agency that oversees Fannie and Freddie had
previously refused to allow permanent principal reduction on loans they own or
guarantee, in mid-September, the Federal Housing Finance Agency told servicers
they could immediately begin accepting money for principal reductions from
programs financed by the U.S. Treasury’s Hardest Hit Fund, including Keep Your
- The California Housing Finance Agency set up four programs under the
Keep Your Home name to distribute California’s Share of the funds — $1.9
billion. It allocated $772 million to principal reduction – enough to
help an estimated 9,000 borrowers.
- To qualify for the principal reduction in California, homeowners must
live in the home, owe more than it is worth, be of low-to-moderate income, and
be delinquent or have some hardship that puts them in imminent risk of default.
- The balance on the first mortgage cannot exceed $729,750. Other
rules apply, but there is no asset limitation. The maximum reduction is
$100,000 per homeowner.
Read the full story from the San Francisco Chronical