From the latimes.com:
A $7.6-billion federal program to help unemployed homeowners stave off foreclosure has provided little relief two years after being unveiled, with less than $218 million of the money paid out to needy borrowers as of Jan. 1.
California, which was allocated nearly $2 billion from the Hardest Hit Fund, provided less than $38.6 million in assistance for 4,357 borrowers by the end of last year, according to the state’s latest report to the Treasury Department.
That amounted to less than 2% of the federal funds available to the state’s Keep Your Home California program.
“It’s about helping the homeowner, and that’s not happening,” said Bruce Marks, head of the foreclosure counseling group Neighborhood Assistance Corp of America. “As we speak, there are thousands of people losing their homes.”
California, Nevada and Arizona jointly devised a plan to provide mortgage relief funds to struggling borrowers only if banks and loan investors agreed to reduce the principal owed on the loan by a matching amount. For instance, a $25,000 principal reduction from the lender would be doubled, producing a $50,000 benefit to the borrower.
State officials say banks, loan investors and the government-owned mortgage giants Fannie Mae and Freddie Mac declined to go along with the plan.
“I think the biggest reason is the banks are not participating in the principal-reduction piece,” said Diane Richardson, legislative director for the California Housing Finance Agency, which developed the state’s program. “They are choosing not to participate for whatever reason.”
California is now considering helping homeowners without lender participation, state housing agency spokeswoman Evan Gerberding said.