California homeowners who refinanced their properties for cash or took out home equity lines of credit will now be allowed to participate in parts of the state's $2-billion foreclosure relief initiative.
Many people tapped their rising equity during the boom years, using their homes as ATMs to fuel spending. The California Housing Finance Agency had initially excluded people who used their home equity in such a manner from participating in its Keep Your Home initiative, which launched this year with federal funds reserved for the 2008 rescue of the financial system.
But California's high unemployment rate caused the agency to reconsider its policy, agency Executive Director Steven Spears said in a statement.
"In the two short months since the launch of these programs, we have collected information that has helped us identify areas of improvement to make the programs more effective, particularly given the continued high level of unemployment in California," he said.
The California Housing Finance Agency will now allow people who refinanced or took out home equity lines of credit to participate in three of its four Keep Your Home programs.
This includes the agency's biggest initiative, which allocates $875 million as temporary financial help to people who have seen their paychecks cut or have lost their jobs, providing as much as $3,000 a month for six months to cover home payments and associated costs.
It also includes a plan that would give homeowners as much as $15,000 to help them get current on their mortgages. The third program provides moving assistance for people who can't afford to remain in their homes.
These same programs also are being expanded to include mortgages that were originated after Jan. 1, 2009, the agency said. Homeowners who previously applied to the program and were disqualified for that reason can reapply.
Those who refinanced or took out a home equity loan will not be allowed to participate in the initiative's principal-reduction effort, its second-biggest and most controversial program. About $790 million is slated for that program, which would write down the value of an estimated 25,135 "underwater" mortgages, those in which the amount owed is more than what the property would bring in a sale.