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California to help pay down homeowners' mortgage debt

BY JIM WASSERMAN Published: July 3, 2010
California's new program is one of the first large-scale attempts at wholesale "principal write downs,” where loans are shrunk to more closely match today's home values.

"We think it's encouraging that they took on principal reduction in the way that they did, devoting most of the resources to it,” said Kevin Stein, associate director of the California Reinvestment Coalition.

The low-income advocacy group has campaigned for principal reductions since 2007.

"That's the real need in California, to address the negative equity of borrowers being underwater,” Stein said.

The California Housing Finance Agency, the state's affordable housing bank, estimates it will help 40,000 or more households avoid foreclosure with principal write downs and other plans unveiled Wednesday. In all, the agency received $700 million for the relief programs, part of a $1.5 billion federal initiative to curb foreclosures in the hardest-hit states.

California Gov. Arnold Schwarzenegger pledged to work with the agency "to ensure that these programs are implemented in a way that assists the greatest number of Californians.”

McClatchy-Tribune Information Services

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