After years of arm twisting and myriad
programs aimed at rehabilitating homeowners with mortgage difficulties, a new
principal reduction initiative was announced today.
The program is targeted for approximately
9,000 homeowners in the California market whose mortgage balance is near or
more than the value of the property, known as being “upside-down.” As part of
the Obama Administration's Hardest Hit Initiative the program is called Keep Your Home California. Funding for the
program comes from the Wall Street Bailout of 2008.
Principal Reductions have been a
political volleyball during the past several years. Advocates stress by not
addressing the problems of homeowners losing equity due to the housing collapse
which started in 2007, the residual effects are deteriorating communities.
Those in opposition stress a free market approach or doing nothing, fearful
that helping homeowners would result in a negative
impact to investors. Edward DeMarco,
Chief of the Federal Housing Finance Agency who oversees
housing giants Fannie Mae and
Freddie Mac has been under intense pressure to use funding already in place to
bring mortgages in line with current values.
Homeowner advocates welcome the news as a
sign in the right direction of restoring a critical tax base.
The new initiative only applies to
homeowners whose mortgage is owned by Fannie Mae or Freddie Mac. To determine
eligibility homeowners are encouraged to visit their website (see below) to
determine who the investor is. Once that is established homeowners should call
their lender or whoever is servicing their mortgage for final eligibility.
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