Principal relief for stressed homeowners

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.