For a city that ranks high on the list of housing markets in trouble, San Francisco’s struggling home owners are about to be introduced to a new kind of mortgage bailout. The Northern California Urban Development (NCUD), a non-profit provider of real estate financing tools, announced one minute ago a deal it crafted with several Bay Area municipalities to help immediately reduce mortgage defaults by refinancing existing loans and replacing a portion of the current mortgage debt with an equity investment. Although the NCUD is known for juggling equity options with refinancing in its efforts to help homeowners 90+ days behind on their mortgages, the home-help is offering the following incentive for the first time: If the homeowner can qualify for a lower mortgage payment on approximately 70% of the current fair market value of the home, the balance of the financing will come from local government agencies that will replace the remaining debt with an ‘EARN Equity Certificate.’ “This certificate has no current payment requirement for the homeowner,” says the NCUD proclamation. “Instead, the homeowner will share that portion of the home’s future appreciated value with the local government agency.” John Liotti, NCUD CEO says: “The Foreclosure Prevention Program is a financial lifeline to an increasing number of working middle class and lower income Americans who are on the brink of losing their homes and falling off a financial precipice from which they will most likely never recover.” “After analyzing the merits of dozens of financial proposals, it became clear to us that only The EARN Group debt-for-equity exchange approach had the potential to make a real and lasting difference in our communities,” he adds. The California-based The EARN Group creates a variety of home financing tools that replace a portion of the real estate debt financing with equity financing. Based on existing mortgage interest rates, NCUD estimates those involved in the Foreclosure Prevention Program may be able to reduce their current monthly housing payments by up to 50% percent. The NCUD says several additional Bay Area cities are expressing interest in the new program, including Menlo Park and East Palo Alto. HousingWire magazine examines the viability of this product in the upcoming June 2009 issue.