All four of California's "Hardest Hit Fund" anti-foreclosure programs are now operational, the state has announced, but only two have substantial participation from the nation's largest lenders.

Funded with nearly $2 billion in federal support, the four programs are designed for low- and moderate-income homeowners experiencing financial hardships and faced with foreclosure. Under the title "Keeping Your Home California," three of the programs provide assistance in meeting mortgage payments, while a fourth is designed to provide relocation assistance for borrowers who chose to surrender their homes voluntarily through a short sale or similar measure.

"Our goal is to get the very most out of these federal dollars to assist California families," said Steven Spears, Executive Director of the California Housing Finance Agency, which operates the programs. "With families struggling through a number of financial hardships and the disruption in the real estate market, these programs will help those in need while stabilizing neighborhoods and communities severely impacted by foreclosures."

Banks steering clear of some options

Two of the programs, which provide temporary cash assistance to homeowners in financial trouble, enjoy broad support from the nation's largest mortgage servicers, who must agree to participate for their clients to be eligible. However, the other two, the relocation assistance program and a principal reduction program for underwater homeowners, have been embraced only by GMAC and several state or regional entities.

All of the "Big Four" banks - JPMorgan Chase, Bank of America, Citibank and Wells Fargo - have agreed to participate in the Unemployed Mortgage Assistance Program (UMA), which provides up to $3,000 a month in mortgage assistance for up to six months to homeowners who have lost their jobs.

All but Bank of America have also agreed to take part in the Mortgage Reinstatement Assistance Program (MRAP), which provides up to $15,000 in catch-up assistance to homeowners who have fallen behind on their payments due to temporary circumstances.

Programs still struggling in many states

The Hardest Hit Fund, first announced one year ago this month, is providing $7.6 billion in foreclosure prevention assistance to 18 states that have been particularly hard-hit by falling home values, high unemployment or both, as well as to the District of Columbia.

Each state and the District developed their own proposals for using their allotments to address their particular foreclosure problems. However, many of the programs have been slow in coming up to speed, in part because the major mortgage servicers have been reluctant to participate. In Michigan, none of the Big Four banks or GMAC have agreed to participate, even though the state was the first to win federal approval for its proposal, officially launching the program last June. Some 150 regional banks and credit unions have signed up, however. In Rhode Island, only a handful of regional lenders have agreed to participate, and none of the big banks. Many other states are still developing their programs, while some others have launched initiatives that require only passive servicer involvement.

Published on February 11, 2011