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Keep Your Home California Now Considers LTV of 140% or Higher a Financial Hardship

underwater homeowner sign

Back in early 2010, the Hardest Hit Fund (HHF) was established by the Treasury to help certain hard-hit states deal with heightened unemployment and foreclosure activity.

A total of 18 states and the District of Columbia were allocated roughly $7.6 billion in federal funds “to develop locally-tailored programs” aimed at getting homeowners back on their feet.

In California, the program is known as “Keep Your Home California,” and it’s overseen by CalHFA. The agency was earmarked $2 billion to allocate to at-risk homeowners via a variety of unique programs.

Homeowners Don’t Have to Be Delinquent Anymore

Today, CalHFA announced an exciting new change to their Principal Reduction Program, recognizing a loan-to-value ratio of 140% or higher as a “financial hardship.”

Prior to this ruling, only things like job loss, pay cuts, extraordinary medical bills, and divorce were considered hardships.

Additionally, mortgages had to be delinquent or meet the CalHFA definition of “imminent default” to qualify for assistance. Mortgages with an LTV of 140% or higher now meet this definition.

In other words, borrowers no longer need to be delinquent in order to receive assistance, so homeowners that kept up with payments despite being severely underwater can finally catch a break.

It’s a big deal because CalHFA is also recognizing the fact that LTVs of 140% or higher are indicative of imminent default, and often lead to foreclosure, even if there isn’t any “real” hardship.

Perhaps other loan servicers and state housing agencies will follow suit.

Anyway, those who qualify are eligible to receive up to $100,000 in free mortgage assistance.

How to qualify for the program:


  • Must be a low-to-moderate income household (below income limits)
  • Must be 1-4 unit owner-occupied property
  • Property must be located in the state of California
  • First mortgage loan amount must not exceed $729,750
  • Modified mortgage payment must be reduced to 38% of gross household income
  • Must have documented, eligible hardship
  • Loan must be delinquent or in imminent default


Assuming all these requirements are met, the money needn’t be paid back as long as you keep your home for at least five years.

If a sale occurs prior to that date, homeowners may be required to pay back the money from proceeds of the sale if there is sufficient home equity.

CalHFA also offers three other mortgage assistance programs:

• Unemployment Mortgage Assistance Program: Provides out-of-work homeowners on unemployment with as much as $3,000 per month in mortgage assistance for up to 12 months.

• Mortgage Reinstatement Assistance Program: Provides a maximum of $25,000 to help delinquent homeowners “catch up” on their past-due mortgage payments.

• Transition Assistance Program: Provides up to $5,000 in relocation assistance to families who have reached an agreement for a deed-in-lieu of foreclosure or a short sale.

For the record, a loan-to-value ratio of 140% or higher is only a hardship for the Principal Reduction Program.

Since Keep Your Home California launched in February 2011, nearly 32,000 homeowners have been given more than $450 million in assistance.

If you want more information about the program, you can call 888-954-KEEP (5337) between 7 a.m. and 7 p.m. weekdays and 9 a.m. to 3 p.m. Saturdays.

For those in other states nationwide, take a look at this website to get state-by-state information about other HHF programs available.

There are some good alternatives to HARP that many borrowers might not realize exist, especially for those with loans not backed by Fannie Mae and Freddie Mac.

For example, in Oregon, non-Fannie and Freddie borrowers can check out the Rebuilding American Homeownership Assistance (RAHA) program, which provides refinancing of underwater mortgages.

State Housing Finance Agencies have until the end of 2017 to allocate monies under the Hardest Hit Fund program.  But act fast, because once the money is gone, the programs will be closed to new applicants.

1 thought on “Keep Your Home California Now Considers LTV of 140% or Higher a Financial Hardship”

  1. This is a great deal for California homeowners due to the fact that a hardship is simply being severely underwater. It’s free money for those willing to take the time to apply.

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