1 in 11 California homeowners struggle to pay their mortgage
Nine months after launching a pandemic relief program to help cash-strapped renters avoid eviction, California has launched a new program to help landlords save their properties from foreclosure or a forced sale.
However, the need for mortgage help pales in comparison to the amount of help tenants are seeking, reflecting how most homeowners have been largely spared the financial wrath of the pandemic.
Fewer homeowners have lost their jobs or income during the coronavirus-related closings. And programs for those in trouble have been much more successful in helping homeowners regain their financial footing.
Meanwhile, the state’s Housing Is Key program is nearly exhausted.
As of Wednesday, January 19, two-thirds of the state housing assistance benefit had been distributed to less than a quarter of tenants applying for state assistance. The state reports that 151,000 of 625,000 applicants received nearly $1.8 billion in housing assistance, not including applications processed through four dozen local and tribal housing assistance programs.
The new $1 billion mortgage relief program, by comparison, is only expected to help 20,000 to 40,000 homeowners facing foreclosure or forced sale.
Since the restaurant, hospitality and tourism jobs that have seen the biggest cuts during the pandemic are mostly filled by tenants, tenants have been hit much harder than landlords, said Vice Vice President Rick Sharga. -Executive Chairman of RealtyTrac, an Irvine company that tracks foreclosures.
Additionally, by allowing homeowners to pay off their homes for up to 18 months, forbearance programs have saved more than 7 million Americans from losing their homes.
“The forbearance program, I think, has been a tremendous success,” Sharga said. “About 8 million people have joined this program since its launch, … (and) there are less than a million left.”
The Mortgage Bankers Association reported Tuesday, January 18 that 1.4% of all US mortgages, or less than 750,000, were in forbearance at the end of December, down from a high of nearly 8.6% in June 2020.
Sixty-one percent of borrowers who exited forbearance eventually resumed making payments and either repaid their missed payments or deferred them until the end of their loan, according to the MBA. Another 21% either got a loan modification, refinanced into a new loan, or sold their home and paid off their debts.
Strict income limits will further limit the number of homeowners receiving state mortgage relief. Eligibility is limited to those earning no more than the overall median income for their region. For example, a family of four cannot earn more than $118,200 in Los Angeles County, $134,500 in Orange County, or $79,900 in Riverside and San Bernardino counties.
US Census figures, however, show that the median income of California homeowners is 23% higher than the state median for all households, renters and homeowners.
To be eligible, owners must also be on some form of public assistance (welfare, unemployment, or Medi-Cal, for example); must pay 40% or more of their income for housing costs; or must have been unable to obtain a loan modification to keep their home out of foreclosure.
Landlords who have lost rental income during the pandemic are not eligible since the program is limited to those who own only one unit.
Thousands of people still need help
Nevertheless, there are still thousands of homeowners who could benefit from the state’s mortgage relief program.
By the end of December, 13,400 California homeowners were at one stage or another in the foreclosure process.
“What happened to them? They lost their jobs or their income was negatively affected,” Sharga said. Either they had two incomes, “and one of the parents had to stay at home because the schools were closed”.
In addition to COVID-19, normal calamities often land people in foreclosure, he said: Job loss, death in the family, medical bills, divorce.
“Something that hit the household and (caused) financial disaster,” Sharga said.
However, these figures are still low, representing around three homeowners per 1,000 with a mortgage. And that’s well below the pre-COVID era when the number of Californians facing foreclosure ranged from 21,675 at the end of 2019 to 41,543 at the end of 2017.
You don’t have to be in foreclosure, however, to qualify for mortgage relief. All you need is to have missed two mortgage payments.
The Census Bureau’s Household Pulse Survey showed more than 460,000 Californians — or one in 11 with a mortgage — were behind on their home payments as of mid-December. Nearly 293,000 homeowners had missed payments in Southern California.
Sell the house
As of Tuesday, Jan. 18, 4,098 homeowners have filed for mortgage relief and the state has approved just under $2.5 million for 67 households, said Chris Saur, spokesman for the California Mortgage Relief Program. That’s an average of nearly $37,000 per household so far.
But the program had only been accepting applications for three weeks at the time.
Unlike renters, homeowners often have the option of selling their home to pay off their mortgage.
RealtyTrac reported that more than 87% of US homeowners in the foreclosure process have some equity in their home, which means their properties are worth more than their mortgage debt. Of these, nearly 73% have more than 20% equity, enough to sell their home for a profit.
Having equity, however, does not guarantee that a home will not default or even end up in foreclosure, Sharga said.
Some defaulters cling to their homes because they worry about where they will live if they sell, he said. Others may not realize they have options or may not know their home has equity.
“It’s not unusual in these circumstances to panic, to deny,” he said.
Yet it is rare that homes with a notice of default or even an auction date are actually foreclosed. In California, homeowners can pay off their debts and “remediate” their default until “the hammer falls,” Sharga said.
“In this cycle, the majority of foreclosed properties will likely be sold before they come to auction simply because there is such demand for properties and there is so much equity in homes,” he said. he declares.
To apply for mortgage relief, go to camortgagerelief.org. Or you can call 1-800-569-4287 to find a housing counsellor.
To see if your income qualifies for mortgage relief, visit bit.ly/HomeownerIncomeLimits.