Keep Your Home California Principal Loan Reduction

by Savone S. from Ceres, California

Ask Kate about a Keep Your Home California principal loan reduction following a HAMP mortgage modification: Savone from Ceres, CA has received a HAMP modification which included a principal reduction to the amount she owes on her mortgage. But she still can't afford her house payment.



So she asks how she can qualify for Keep Your Home California, a supplemental state program to Making Home Affordable, to further reduce the loan balance. This is crucial to making her mortgage more affordable and saving her family home from foreclosure.

Trying to Get Another Principal Loan Reduction

By Savone S. from Ceres, CA

Hi Kate,

I was trying to get a principal reduction with my current mortgage company Ocwen but I got denied because they said I already got a loan modification from HAMP.

When I purchased my home in April of 2008, it was $315,000. Now it's probably worth $170,000.

Keep Your Home California Principal Reduction After HAMP Modification
They modified my loan to where $56,000 is deferred to the end of the loan as a balloon payment after 40 years.

The remaining balance of $259,000 was modify to 2% for 40 years and I think in 2015 it might go up to 3%.

I'm a single mom and I'm barely making ends meet. I also applied with Keep Your Home California and they approved my principal reduction but Ocwen denied my application.

I can barely make my payment without the help from my friend but I need to be making the mortgage payment for the rest of my life. Is there a way I can qualify for a principal reduction?

Ask Kate answers: Trying to Get a Principal Loan Reduction

Ask Kate at Get-Your-Best-Mortgage-Rate.com
Hi Savone,

The Making Home Affordable Program (MHA) of our federal administration focuses on HARP (the refinance plan for lower interest rates) and HAMP (the modification plan for lower payments).

But sometimes modifying the terms of the existing mortgage is not sufficient to create an affordable monthly house payment, the main goal of the HAMP program.

So often to achieve affordability, homeowners with an economic hardship and a severely underwater mortgage receive a reduction to their loan balance via the Principal Reduction Alternative (PRA) program.

Go here to view the criteria for the PRA program.

Possible Repayment of Principal Reduction When House Sells

However, don't assume the reduction is necessarily permanent. Frequently, the reduction sets aside a non-interest bearing portion of the loan balance when calculating the mortgage payment.

Generally speaking, homeowners would never be required to pay back the reduction out of their pocket. However if the house is sold, any equity could be required to go first to the lender for repayment of the deferred amount.

Sometimes though, the lender will forgive the deferred principal. Homeowners should read their modification documents to see which terms apply to them.

Go here to read more about paying back principal reductions.

Keep Your Home California Principal Curtailment Following HAMP Principal Reduction

But back to your question. Can you get approved for an additional principal reduction following your HAMP modification?

Though you've already received a principal reduction from the HAMP modification program, Keep Your Home California (KYHC), a federally funded state program that assists struggling California mortgage borrowers, may be able to assist your further.

KYHC reserves the right to offer an additional principal curtailment (not to exceed $100,000 total) following a HAMP loan reduction if the homeowner has a subsequent hardship, the property value has severely plummeted, and when the occupancy status is owner-occupied. The California program can also eliminate an existing principal reduction received during a HAMP loan modification.

Even so, KYHC depends on the voluntary participation of your loan servicer. As you have found out, Ocwen is not cooperating. I suggest you call Ocwen and ask for the reason they denied your KYHC principal curtailment.

Then taking that information, call a Keep Your Home California housing counselor at 888-954-5337 to ask for a course of action. Additionally, you could call a HOPE counselor who works with the Making Home Affordable HAMP program at 888-995-4673. There is no charge for the HOPE counseling that offers to help you work with your lender.

Go here to read more about the free HOPE housing experts who are available every day of the year around the clock in over 160 languages.

I wish you the very best.

Sincerely,

Ask Kate


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