California to Implement Four Programs With Hardest Hit Funding

In a ""proposal"":http://keepyourhome.calhfa.ca.gov/proposal.pdf submitted to the ""Treasury Department"":http://www.treasury.gov/, the ""California Housing Finance Agency"":http://www.calhfa.ca.gov/ (CalHFA) detailed how it plans to use $699.1 million in federal aid made available through the administration's Hardest Hit Fund.

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According to the proposal, CalHFA will use the funds to implement four distinct programs, three designed to help California homeowners remain in their homes and one intended to help underwater homeowners transition out of their homes into more affordable housing. Qualified households will be eligible to receive a maximum benefit of $50,000, which may be used on one individual program or in conjunction with others.

Through its Unemployment Mortgage Assistance Program, CalHFA will provide temporary financial assistance in the form of a mortgage payment subsidy of varying size and term to unemployed homeowners at risk of foreclosure. These funds will provide up to six months of benefits, with a monthly benefit of up to $1,500 or 50 percent of the existing total monthly mortgage payment, whichever is less. The program benefit cap will be $9,000

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per household. According to ""_The Wall Street Journal_"":http://blogs.wsj.com/developments/2010/04/29/california-proposes-principal-write-downs-for-homeowners/, CalHFA will use around $427 million â€" the bulk of its hardest hit funding â€" for this program.

The Mortgage Reinstatement Program was designed to provide financial assistance to reinstate delinquent mortgage loans that are in arrears to prevent foreclosures. Funds available through this program will provide benefits of up to $15,000 per household or 50 percent of the past mortgage due arrearage amount, with a required dollar-for-dollar contribution match from the lender, servicer, insurer, and/or borrower.

A third program, the Principal Reduction Program, will provide capital on a matching basis with participating financial institutions to reduce outstanding principal balances of qualifying borrowers with negative equity to market levels needed to prevent avoidable foreclosures and promote sustainable homeownership. Funds will be available up to the benefit cap of $50,000 per household, and all dollars associated with the program must be matched dollar-for-dollar by the participating lender.

The final program will provide eligible homeowner with transition assistance when it is determined that they can no longer afford their home. The Transition Assistance Program will be used in conjunction with short sale and deed-in-lieu of foreclosure programs to help borrowers transition to affordable housing. TAP funds will be available on a one-time only basis of up to $5,000 per household.

In addition to these four programs, CalHFA proposed allocating $20 million to a local innovation fund. The agency said this separate fund will encourage a variety of ""alternative and innovative"" solutions for mitigating the foreclosure crisis.