If you have fallen behind on your mortgage payments because of a financial hardship, California's Mortgage Reinstatement Assistance Program might help you reinstate (bring your loan current in one lump sum payment) your mortgage. The program is part of Keep Your Home California. Read on to get an overview of the Mortgage Reinstatement Assistance Program, learn how much assistance is available, and find out if you are eligible.
Keep Your Home California
In 2010, the U.S. Department of the Treasury created the Hardest Hit Fund to provide targeted aid to homeowners in those states most affected by the housing market crash. As part of this program, $7.6 billion in aid was allocated to the 18 states, along with Washington, D.C., that experienced the most extreme home price declines and high unemployment rates as a result of the economic crisis.
(Learn more about the Hardest Hit Fund.)
Through the Hardest Hit Fund, California was awarded nearly $2 billion in funds to help eligible homeowners avoid foreclosures by way of four programs, which are collectively called Keep Your Home California (get an Overview of Keep Your Home California). Each program provides a different type of financial assistance to low and moderate-income homeowners. The four programs are:
- The Unemployment Mortgage Assistance Program, which provides mortgage payment assistance to unemployed homeowners.
- The Mortgage Reinstatement Assistance Program, which helps homeowners catch up on missed payments.
- The Principal Reduction Program, which provides funds to underwater homeowners to pay down the principal balance of a first mortgage loan.
- The Transition Assistance Program, which assists homeowners who are undergoing a short sale or deed in lieu of foreclosure transition to new housing. (See our Short Sales and Deeds in Lieu of Foreclosure area for more information on these topics.)
(To learn about the other programs in Keep Your Home California, visit our California Foreclosure Law Center.)
The Mortgage Reinstatement Assistance Program
The Mortgage Reinstatement Assistance Program (MRAP) helps homeowners avoid foreclosure by providing funds to reinstate a delinquent mortgage loan. (Learn more about the California foreclosure process.)
The program provides a one-time payment of up to $25,000 to cover principal, interest, taxes and insurance (PITI), as well as any escrowed homeowner’s association dues or past-due assessments.
How the Program Works
The assistance is provided in the form of a non-recourse, non-interest bearing subordinate loan secured by a junior lien that is recorded against the property. After three years, the subordinate lien will be released. You only need to repay the loan if you sell the home for a profit or refinance (and take cash out) during that time.
MRAP can act as a gateway to other Keep Your Home California programs, including the Principal Reduction Program (subject to the overall program benefit cap of $100,000 per household), as well as other loss mitigation programs such as HAMP. (To learn about HAMP and other government programs for distressed homeowners, visit Nolo's Government Foreclosure Prevention Programs area.)
Borrower Eligibility Criteria for MRAP
To be eligible for MRAP, you must qualify as a low or moderate-income household based on all of the below criteria.
- Your household income is 120% or less of the California State Department of Housing and Community Development (HCD) Area Median Income for a family of four in the county where you live. (The income limits are higher than you might guess. For example, the limit is $123,600 in San Francisco county and $91,100 in San Diego county. To find out the income limits in your county, go to http://keepyourhomecalifornia.org/income-limits.) Also, a homeowner is presumed to satisfy income limits if he or she has a loan financed in whole or in part by bonds that are tax-exempt under IRC section 143.
- You recently encountered a financial hardship.
- You have completed and signed a Hardship Affidavit/3rd Party Authorization documenting the reason for your hardship.
- You have adequate income to sustain the reinstated mortgage payments.
- You agree to provide all necessary documentation to satisfy program guidelines.
- If the reinstatement assistance is combined with a loan modification, your modified monthly mortgage payment ratio must be reduced to at least 38% of the gross household income, excluding unemployment benefits.
Home Eligibility Criteria for MRAP
Additionally, your existing mortgage and the property securing that mortgage must meet the below criteria.
- The current unpaid principal balance for the first-lien mortgage loan is $729,750 or less.
- The home is not abandoned, vacant, or condemned.
- The property is a single-family or one-to-four unit home that is owner-occupied.
- The property is in California.
- The property is your primary residence.
Mobile homes are eligible if they are permanently affixed to the real property that is secured by the first lien. (Learn more about what happens if you are struggling to pay your mobile home loan.)
You are not eligible for assistance through MRAP if one of the below conditions applies to you.
- You filed bankruptcy and the bankruptcy is active. (If you previously filed bankruptcy and it was dismissed or you received a discharge, then you are eligible to apply for the program.)
- You are less than two payments past due on the date you request assistance.
- Your first-lien mortgage payment PITI and escrowed association fees is greater than 38% of your gross monthly household income, excluding unemployment benefits (unless the MRAP assistance is combined with a loan modification).
Servicer participation in the program is voluntary. (A mortgage servicer is the company that collects monthly mortgage payments from borrowers on behalf of the owner of the loan, as well as tracks account balances, manages the escrow account, handles loss mitigation applications, and pursues foreclosure in the case of defaulted loans.) Almost all servicers have signed on for MRAP participation.
To find out if your servicer is participating in MRAP, go to http://keepyourhomecalifornia.org/participating-servicers.
How to Apply
To apply for MRAP assistance, you can:
- call Keep Your Home California at 888-954-KEEP (5337)
- contact your mortgage servicer directly, or
- visit one of the HUD-approved counseling agencies participating in Keep Your Home California. (To learn more about housing counseling, see our article Free Counseling in California for Struggling Homeowners.)