February 15, 2011
Washington, D.C. – Several Northern California members of Congress are urging mortgage servicers to work with a new federally funded program in California intended to help unemployed homeowners pay their mortgages and avoid foreclosure.
The Keep Your Home California Unemployment Mortgage Assistance Program provides qualified unemployed homeowners up to $3,000 a month for up to six months to help pay their mortgage. The lawmakers recently learned, however, that if the monthly mortgage exceeds $3,000, the servicers will not accept any payment at all, even if the homeowner could send a second check to cover the difference between what is owed and what the program covers.
As a result, unemployed homeowners who could avoid foreclosure proceedings thanks to this program are instead at risk of failing to pay their mortgage and landing in foreclosure.
“It’s time that banks and servicers become part of the solution and not the problem,” noted Rep. Zoe Lofgren (D-San Jose). “It’s ridiculous that servicers and banks are unwilling to participate in a program that will help protect the value of the very asset on which their loan is based on. I find it deeply troubling that servicers would have borrowers default rather than simply accepting payment.”
“If this program is to have meaningful success, mortgage servicers are going to have to get on board with processing these payments,” said Rep. George Miller (D-Martinez), one of several California members of Congress who wrote to mortgage services today about this issue. “Refusing to accept dual payments is unacceptable and is a disservice to the homeowners who are doing everything they can to stay in their homes while they look for work. Homeowners shouldn’t have to forfeit their homes because of bureaucratic intransigence by banks and servicers.”
News reports and discussions with California housing agency officials responsible for the program confirm that servicers are rejecting two simple solutions to the problem that monthly mortgages can easily exceed the program limit of $3,000 – to either accept two checks, one from the program and one from the homeowner, or to forebear the amount of the mortgage that exceeds the $3,000 program payment.
In their letter, the lawmakers wrote that, “we believe refusing to accept supplementary payments from homeowners is inexcusable and we strongly urge you to remedy this problem expeditiously… It is unacceptable that servicers in California are unwilling or unable to figure out a workable resolution to this problem, particularly given that two viable options to address the issue exist.”
This letter follows another recent letter from California members of Congress to large mortgage servicers urging them to fully participate in the four pillars of the CalHFA program. Only one large private servicer, GMAC , is participating in each of the four programs offered under the Keep Your Home California umbrella.