Principal Reduction Florida Hardest Hit Fund FAQs

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Shahram Sondi
September 24, 2013

Florida will distribute about $350 million towards homeowners by way of principal reduction on their current owner occupied residence. The number of people who will receive help depends on how much each homeowner will receive.  However, there are many stipulations that factor into whether or not you will be able to take advantage of this free money and have the opportunity to take advantage of the lowest mortgage rates.

Below is a summary/opinion to help clarify how Florida homeowners might qualify for the Florida Hardest Hit Fund Principal Reduction (HHF-PR):

  1. The homeowner must be a US citizen or legal alien.  This only makes sense because if you are illegal, you probably wouldn’t have qualified for a mortgage in the first place.
  2. The mortgage on your underwater home has to be an owner occupied residence.  Meaning, you must currently live in the property and must also be able to show homestead. The mystery is, what if you have a condo as a second home that is underwater? More information on this may be available at a later time.
  3. Your mortgage had to have been originated prior to Jan 2010. So, does this count if you purchased your home and never refinanced your mortgage? What if you purchased your home in 2001 but refinanced it multiple times and spent all the equity in your home prior to Jan 2010.  Are you eligible? Chances are, if you never refinanced your home, you will definitely qualify. However, if you refinanced and cashed out the equity, you probably won’t qualify.
  4. You cannot be late on your mortgage at the time of application.  Secondly, you could not have gone more than 60 days past due on your mortgage payment within the last 2 years.
  5. You cannot be upside down on your mortgage by less than 125%. Thus, loan-to-value cannot be less than 125%.  The question arises of how is the value determined: Automated values or full appraisal? The textbook definition of an appraisal is “Appraisal is an art and not a science.”  So one appraiser can appraise a property 10% or more than the other.  So if the value comes in at 120% just because of appraiser’s opinion, your financial livelihood goes down the drain.
  6. You must be able to document complete household income.  If you are unemployed you are most likely not going to qualify for principal reduction. Your total annual household income in Orange county Florida cannot exceed $81,900.00.  So, if you are self-employed and had a great year last year but now are experiencing a major decrease in income, how do they determine your income?  If you make a good living but got caught in the housing bubble you won’t get help.  Is this fair for a hard working taxpayer? You be the judge of that.
  7. Can your current servicer/mortgage company hold you back from taking advantage of the principal reduction?  Yes.  Your current mortgage must be eligible for recast through your HHF-PR participating lender or mortgage loan servicer, or be able to streamline refinance under programs such as HARP.  If you don’t meet the recast or streamline refinance scenarios, and your servicer is a non-participant then, you pretty much have no hope of the principal reduction under the Florida Hardest-Hit Fund.
  8. If you sell your home or do a cash-out or a debt-consolidation refinance within the next 5 years you will have to pay back a percentage of the principal reduction. The pay back reduces by 20% each year from the inception of principal reduction.

The application date starts at 9am September 25, 2013.  The application link will probably get disabled within few hours once they reach 25,000 applications. That is, if the site does not crash due to the overwhelming applicants trying to access the site.

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