Homeowners in California who owe more than their home is worth and are facing financial hardship may be able to take advantage of a State sponsored program called Keep Your Home California. This $2 billion program is funded by federal funds and is targeted to offer help to about 100,000 struggling homeowners. A key part of the plan is to reduce the loan balance on homes where the market value has dropped significantly and homeowners find themselves underwater on their mortgage. The continued rise in foreclosures is causing a downward pressure on home values, and as more foreclosed homes become part of the available inventory, the problem continues to worsen. The key to this new program is that homeowners can actually stay in their home with one of several loan modification options:

But here's something that your mortgage lender doesn't want you to know-you do have options when you're faced with an underwater mortgage. Far more options than you know! And you can survive this underwater mortgage and come out the other end of things with yourself, your family, and even most of your finances intact. You just have to be willing to be a little ruthless and think of your house the way your mortgage lender thinks of it-as numbers on a piece of paper. Yes, we know this is hard. My wife, has started specializing in helping clients with short sales. She gets to hold the hands of crying clients when she has to tell them that their memories and their hopes and dreams for their house don't make it worth a penny more to a buyer.

My wife, specializes in short sales now, and this is a struggle she sees people having all the time. But what's worse-giving up the house or giving up your financial future? Because if you're having financial difficulties and you have an underwater mortgage help, that's the decision you're faced with right now. If you wouldn't be willing to risk your life to save your house, why risk your future to save it? This mental toughness comes into play when you're listing your home for short sale. Your home is only worth what someone else is willing to pay for it, and not a penny more. So be realistic about this. Follow your Realtor's advice about the true value of your house. Getting out from under your underwater mortgage depends on it!

The banks have been reluctant to reduce principal on loans for underwater homeowners, but under this loan modification program they would be reimbursed $1 for every dollar of mortgage debt forgiven. The State is still trying to get the big lenders to sign on and agree to participate in the Keep Your Home plan, and because foreclosures on homes is so expensive banks will come out ahead financially by writing down loan balances and keeping borrowers in their homes.

Homeowners must be prepared to complete and submit an acceptable loan modification application in order to qualify for this plan. Their monthly income, monthly expenses and bank balances will all be reviewed carefully to determine if they qualify for assistance. Interested borrowers need to carefully prepare their paperwork so that they have the best chance of being found eligible for this new loan modification program.

Learn more about Obama Mortgage Relief Plan Qualifications.