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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
    Home California.
  • 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