Reverse mortgage borrowers facing foreclosure in California can turn to a new assistance program announced Tuesday, which offers up to $25,000 in relief for certain homeowners. It is similar to an underperforming program launched in Florida in 2013.
The pilot program is designed for low- and moderate-income seniors who are at foreclosure risk due to delinquent property expenses related to a reverse mortgage, and it is being administered by Keep Your Home California. The organization was established to help distribute California’s “Hardest Hit” dollars, which the federal government funneled to states where house prices declined drastically during the economic downturn.
Unpaid property taxes and homeowners’ insurance premiums are among the expenses that could be met through the pilot program. It offers loans that are forgiven after a term of two years, Steven Gallager, marketing and external affairs director for Keep Your Home CA, told Reverse Mortgage Daily.
“The only way that someone would have to pay back assistance is if they sell their home before they end of that term and make a profit,” Gallagher told RMD. “Then we would ask them to return the assistance so that it could be distributed to other homeowners.”
While formally announced Tuesday, the program has been up and running since earlier this month. Gallagher believes other states might closely watch how the pilot plays out in California, because to his knowledge only Florida has implemented a similar program.
The results in Florida have been lackluster, The Palm Beach Post reported in September. That program had accepted 245 seniors through the end of August, providing an average of about $13,000 in relief per borrower. Better outreach efforts could help more people access the financial assistance, according to officials quoted in the Post.
About 1,400 Golden State residents could benefit from the new program, according to estimates from Keep Your Home California.
A homeowner must meet various requirements, including income limits, to qualify for the program. To be eligible, a borrower also must have experienced a financial hardship and be able to make property expense payments going forward.
Champion, Financial Freedom, James B. Nutter, Reverse Mortgage Solutions (RMS), SunWest and Wells Fargo are the only servicers currently taking part in the program, but more are expected to enroll soon, according to Keep Your Home California.
A list of participating servicers will be maintained on the pilot program website.
Editor’s note: This story has been updated to reflect corrections. Previously, it listed Residential Mortgage Solutions as a participating servicer. This has been changed to Reverse Mortgage Solutions. RMD regrets this error.
Written by Tim Mullaney