$125 million mortgage relief program OK’d for California disaster victims

The California Housing Finance Agency expects to begin a $125 million mortgage relief program to benefit victims of recent wildfires and other natural disasters by June 1.

The program, which taps funds from a legal settlement fund created after major lenders were accused of misconduct during the subprime mortgage crisis in 2008, was approved Thursday, Feb. 20, by the agency’s 10-member board of directors.

The multibillion-dollar settlement penalized lenders for robo-signing and other servicing and foreclosure misconduct.

Gov. Gavin Newsom said on Wednesday that $100 million would be used to pay the mortgages of low- to moderate-income homeowners who face foreclosure due to the natural disasters.

An additional $25 million would be used to extend an existing program that provides mortgage guidance on disaster assistance by the Federal Emergency Management Agency. The funding would also would help with shelter lodging, pet assistance, prescription medication assistance and food.

Rebecca Franklin, CalHFA’s interim executive director, said during CalHFA board meeting that the relief program would help pay mortgages for homeowners for three to six months.

Last month, several lenders gave homeowners affected by the L.A. area fires a little relief on their mortgage payments.

Bank of America, Citi, JPMorgan Chase, U.S. Bank, and Wells Fargo and 420 state-chartered banks, credit unions and mortgage lenders offered wildfire victims a 90-day forbearance of their mortgage payments, without reporting these payments to credit reporting agencies, and the opportunity for additional relief.

Funding for the mortgage relief program comes from a 2012 national mortgage settlement among California homeowners, the U.S. government and 49 states. The $25 billion settlement, with $4 billion earmarked for California, penalized lenders including Ally Financial Inc. (formerly known as General Motors Acceptance Corp.), Bank of America, Citigroup, JPMorgan Chase and Wells Fargo.

CalHFA received its last $300 million settlement installment in 2019, according to a spokesman for the California Business, Consumer Services and Housing Agency. Since then, CalHFA has used the money to support the National Mortgage Settlement Housing Counseling Program, which reimburses counseling sessions for more than 78,000 households in housing agencies throughout the state.

The $125 million proposed for mortgage relief and counseling services is what’s left of the settlement fund.