The Treasury Department is set to revamp its program aimed at helping struggling mortgage holders from falling into foreclosure and losing their homes.
The New York Times is reporting that the Obama administration will soon announce changes to the $75 billion Making Home Affordable program, such as reducing the paperwork necessary for borrowers seeking reduced mortgage payments.
Banking industry representatives who spoke anonymously to The Times said that Treasury would offer increased assistance to homeowners no longer able to make mortgage payments because their paychecks have shrunk.
This push to improve the success rate of Making Homes Affordable program, writes The Times' Peter S. Goodman, comes as Americans continue to face double-digit unemployment while bailed-out banks report huge profits, creating increased pressure for the Obama administration to help struggling homeowners.
According to The Times, housing experts predict the changes would cause mortgage holders to move more quickly to lower payments from borrowers — but also perhaps prolonging the foreclosure crisis by postponing delinquencies.
A Treasury official declined to offer specifics, but confirmed that plans to alter the program would be discussed at a meeting with mortgage companies next week, "to expedite conversions of current trial modifications and provide guidance on documentation," assistant secretary for financial institutions, Michael S. Barr, told The Times.
Goodman writes that the changes will not likely affect homeowners who are underwater — owing more than their houses are worth. Experts say if banks do not forgive loan balances and restore equity to borrowers, a growing number of underwater borrowers will simply walk away from their homes.
While the administration has been paying mortgage companies that reduce payments from borrowers, most loan modifications have come about by a reduction in interest rates for a period of several months, without reducing the balance owed.
To date mortgage companies had modified payments on 759,000 loans, usually for a period of three to five months. Longer-term reductions have only gone to about 31,000 homeowners.
"There's a great degree of frustration about how this has been going," Alan M. White, a professor at Valparaiso University Law School, told The Times.
For more info:
Treasury Weighs Fixes to Foreclosures Program (11.22.10)