California has a new COVID-19 mortgage relief program

Federal COVID-19 relief dollars have already helped more than 140,000 California renters pay off the debt they owed their landlords during the pandemic.

Now the state is offering similar relief to qualified homeowners who have fallen behind on their mortgages. The new California Mortgage Relief program will pay up to $80,000 in mortgage, property tax and insurance bills for qualified applicants.

“The COVID-19 pandemic has left many California homeowners struggling to cover their mortgage costs,” said Rebecca Franklin, president of California Housing Finance Agency’s Homeowner Relief Corp. “This program is designed to help low-to-moderate income Californians who have lost their jobs or experienced financial hardship due to COVID-19 and have fallen behind on their payments, get caught up and start fresh.

The program is funded by a $1 billion grant from the federal government, which allocated $10 billion for mortgage relief in March as part of the US bailout. The Treasury Department allocated the money based on each state’s population of unemployed and borrowers with delinquent mortgages.

To qualify, a household must not earn more than the median income for its area (e.g., $118,200 for a family of four in Los Angeles County), and the home at risk for foreclosure must be the residence principal of the household. Here are the details on who is eligible, how to apply, when help will start flowing and how long help will be available.

Are you eligible?

The program is designed to only help homeowners who are already well behind on their mortgages due to the pandemic and who are not working out a plan with their lenders to defer certain debts to avoid foreclosure.

According to the state program’s website, you are eligible for assistance if you and the California property in question meet the following conditions:

• You own and occupy only one property, and that is your principal residence.

• Your residence is a single family home, condominium or non-mobile manufactured home in California.

• You experienced COVID-related financial hardship after January 21, 2020.

• You have at least two outstanding mortgage payments as of December 27, 2021.

• Your household does not earn more than the median income for your area, which can be viewed on the program website. You should also have a limited amount of cash and other assets that can be easily converted into cash.

• The first mortgage you took out on your home was a ‘conforming loan’, which means it was small enough for Fannie Mae or Freddie Mac to buy it from your lender. The limit increases each year; last year in Los Angeles County it was $822,375.

• At least one of these three things is true for you: You receive all or a significant portion of your income from welfare, food stamps and other forms of public assistance; you suffer from “serious housing problems”: your mortgage and related costs consume more than 40% of your income; or your lender declined an “alternative workout option” that would have helped you avoid foreclosure.

People who have received other forms of government assistance or loan forbearance from their lenders are still eligible to apply for the new program. But struggling homeowners should talk to their mortgage officer about other options, such as a formal loan modification that lowers their payments, Franklin said in an email. In some cases, she says, these options may be more beneficial to the borrower than the state program.

Notably, help will also be available for eligible people with reverse mortgages – meaning they are borrowing against a fully paid-off home – who have fallen behind on property taxes or premiums for insurance coverage. home insurance mandated by their lender.

Another major caveat: since the money goes directly to the company that handles your loan, you won’t be able to get help if that company doesn’t participate in the program. As of late December, state officials said 43 servicers handling about 83% of eligible loans in the state were participating, and an additional 13 servicers handling 3% of those loans were participating in the program. The state contacted the remaining repairers to try to get them to register as well.

Susan Milazzo, chief executive of California Mortgage Bankers Assn., said it makes more financial sense these days for lenders to take state help than foreclosure. “Mortgage bankers want to take whatever steps are necessary and available to them to keep homeowners in their homes,” she said.

What kind of financial difficulties count?

The definition is broad and covers anything related to the pandemic that has significantly reduced your household income or increased your living expenses, including temporary changes.

Examples of income cuts include being laid off or reducing your hours when your employer had to close its stores or limit in-person services. Examples of higher living expenses include COVID-related medical bills and higher food costs because you had to accommodate relatives who lost their jobs.

You don’t have to back this up with specific proof or documents; instead, you simply need to certify that you suffered an ordeal due to COVID and describe it. But be warned, false statements can result in prosecution for perjury.

How to apply?

You must do this online, at camortgagerelief.org. If you don’t have access to the internet or a computer, you can ask a housing counselor to help you. For help finding a counselor certified by the federal Department of Housing and Urban Development, call (800) 569-4287. You can also get help from the company that handles your mortgage.

The online application process begins with questions to determine your eligibility. If you meet the state’s criteria, then you can complete an application for the funds. Here is where you will need certain documents to establish how much you earn and how much you owe.

According to the program’s website, among the documents you’ll need to provide include a mortgage statement, bank statements, utility bills, and records showing the income earned by each adult in your household, such as pay stubs, tax returns or a declaration of unemployment. advantages. Applicants who are not dependent on public assistance or who pay more than 40% of their household income to their lenders will also need to provide proof that their lender has refused to defer the debt or modify their loan to help them avoid the input.

The site provides links to the app in English, Spanish, Chinese, Korean, Vietnamese, and Tagalog.

“If you have all of your information and documents gathered, you can complete the application on a computer, smartphone, or tablet in less than 30 minutes,” Franklin said. “Documents can easily be uploaded through your smartphone by using your phone’s browser to log into the application portal and taking a picture of the necessary information and adding it to your application.”

When will your mortgage debt be paid?

This is a key issue, given that the federal government lifted its moratorium on state-backed mortgage foreclosures in late July. According to the state attorney general’s office, homeowners still have the right to ask their lender for a debt deferral agreement that could keep them from foreclosure for at least a few more months, but if your lender doesn’t give you forbearance, you’ll need help quickly.

A spokeswoman for the program said officials hoped help would arrive soon; the state has been running a pilot version of the program since August, so it’s not innovating here, it’s just scaling up. A key factor in how quickly your application can be processed is whether you provide all necessary documents and certifications in a timely manner.

Unsuccessful applicants may reapply if their circumstances change. They can also appeal the decision by emailing [email protected] and pleading for an overturn.

However, once your application has been accepted, you will no longer be eligible for any further assistance from the program.

When will the program end?

There is no fixed date; instead, the state will continue to offer assistance to homeowners who became delinquent in 2020 and 2021 until it has spent all of the federal government’s billion dollars, a process that is expected to take three years. The state estimates that the money will be enough to help 20,000 to 40,000 borrowers.

The money will be allocated on a first-come, first-served basis, with one exception: 40% of the aid must go to “socially disadvantaged homeowners”. These are residents of neighborhoods most at risk for foreclosure, based on the Homeowner Vulnerability Index developed by UCLA’s Center for Neighborhood Knowledge.

California is launching a program to pay off overdue mortgage debt in hopes of averting another wave of foreclosures like the one seen in the late 2000s.

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