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Options for Unemployed Homeowners

The number of Americans filing for first-time unemployment benefits rose again to their highest level in a month, according to CNNMoney.com. The Labor Department reported 402,000 initial jobless claims filed in the week ending Nov. 26 – that was up 6,000 from the week before and marked the highest level since the week of Oct. 22.

And while the unemployment rate is a partial contributing factor in the housing crisis, unemployed homeowners have several options for avoiding foreclosure.

Four options are offered through CalHFA MAC, a nonprofit organization created specifically to receive and disburse federal funding to qualified California homeowners.

  • If you are currently unemployed and are receiving unemployment benefits you might qualify for the Unemployment Mortgage Assistance Program (UMA), developed to provide temporary financial assistance to eligible California homeowners who wish to remain in their homes but have suffered a loss of income due to unemployment. UMA provides mortgage payment assistance for up to nine (9) months with the purpose of preventing avoidable foreclosures.
  • The Mortgage Reinstatement Assistance Program (MRAP) is one of CalHFA MAC’s federally-funded programs developed to provide temporary financial assistance to eligible homeowners who wish to remain in their homes but are in imminent danger of losing their home to foreclosure. Benefit assistance through MRAP can be a one time payment of up to $20,000 to cover principal, interest, taxes and insurance, as well as any homeowner’s association dues.
  • The Principal Reduction Program provides assistance to eligible homeowners who have experienced an economic hardship coupled with a severe decline in the home’s value. Homeowners who qualify for the PRP could be eligible for up to $50,000 in assistance from Keep Your Home California. The PRP requires a dollar-for-dollar match from the participating servicer, so the total amount of reduced principal could be up to $100,000.
  • The Transition Assistance Program provides one-time funds to help eligible homeowners relocate into a new housing situation after executing a short sale or deed-in-lieu of foreclosure program. The TAP can provide up to $5,000 in transition assistance per household.

Other options for unemployed homeowners include:

  • Loan Modification: Unemployment alone should not deter you from considering a mortgage modification. According to Fannie Mae, unemployment benefits can be considered in determining if you qualify. To be approved for a mortgage modification, you need to have enough income to make a reasonably modified payment. To see if your unemployment benefits are sufficient to qualify you for a loan modification, you’ll need to make a few calculations.
  • Bankruptcy: If you have already been denied a modification or don’t receive enough in unemployment benefits to qualify for a modification, a Chapter 7 or Chapter 13 filing can get your other debts discharged or reduced, your payments under control, and wipe out the arrearages to your mortgage lender. At that point you may have more bargaining power than you did before filing for a modification. We recommend speaking with an experienced bankruptcy attorney to determine your best options — an hour with a real professional is money well spent.
  • Renting: You might also consider renting your home or unused rooms to contribute to your mortgage payment.
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