A federal relief effort that set aside nearly $2 billion in housing aid for troubled Californians is being expanded to help older homeowners avert foreclosures on their reverse mortgages.
The program, in a pilot stage, will provide up to $25,000 to low- and moderate-income borrowers who have fallen behind on property tax or insurance payments because of financial shocks, the California Housing Finance Agency said Tuesday.
Officials said about 1,400 homeowners might benefit from the effort, being added to the Keep Your Home California menu of programs set up in 2011 with money from the Troubled Asset Relief Program, which bailed out banks and the auto industry.
Reverse mortgages provide income to borrowers 62 and older, secured by their home equity. Families must repay the funds or let lenders repossess the homes when the borrowers die or move out.
Properties also can be seized if the borrowers become delinquent on tax or insurance payments -- the homeowners targeted for assistance under the new program.
“There are many senior homeowners who need a helping hand in order to get back on track with their reverse mortgage-related expenses,” said Tia Boatman Patterson, executive director of the California Housing Finance Agency.
“We don’t want these seniors, many of whom live on a fixed income, to lose their homes because of some missed payments caused by a financial hardship beyond their control.”
The borrowers must have reverse mortgages insured by the Federal Housing Administration and owned by Fannie Mae, the government-backed mortgage finance giant. The state housing agency initially has set aside $25 million for the pilot program, to be expanded if the relief effort proves successful.
As with all the Keep Your Home California programs, the borrowers must demonstrate that they have endured a financial hardship -- such as a reduction of income, a divorce, a death in the family or extraordinary medical bills -- to qualify for assistance.
The $25,000 can be used to bring homeowners current on home expenses and to pay for up to a year of additional costs for property taxes, home insurance, association dues and other expenses.
The homeowners must reside in the home subject to the reverse mortgage and be able to make required property expense payments going forward.
Additional details may be found on a Keep Your Home California web page. Homeowners needing assistance were asked to contact their reverse mortgage servicer -- the company that collects payments -- to apply for the pilot program.
So far, six servicers are participating -- Champion, Financial Freedom, James B. Nutter, Reverse Mortgage Solutions, SunWest and Wells Fargo. Their contact information is on the program's web page.
More reverse mortgage servicers are expected to participate in the program soon, the housing finance agency said.
California was among 18 states and the District of Columbia deemed eligible for housing assistance from the U.S. Treasury's Hardest Hit Fund. The effort was funded with $7.6 billion left over from efforts to stem the financial crisis.
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