Gov't launches mortgage aid programBy ALAN ZIBEL, AP
posted: 47 MINUTES AGO
WASHINGTON -The government kicked off a program Wednesday that aims to prevent foreclosures by letting an estimated
400,000 troubled homeowners swap their mortgages for more affordable loans.
Lenders, rather than borrowers, will decide whether to participate in the program, which requires them to take a loss on the initial loan. The
$300 billion, three-year program launched Wednesday is designed to help borrowers who owe more on their loans than their homes are worth.
To qualify, borrowers must be spending more than
31 percent of their income on mortgage payments.
Loans made this year are excluded, except for those completed on Jan 1. Borrowers must have made six months of payments on their loans.
"For homeowners in trouble, this may be the help that they need,"
Housing and Urban Development Secretary Steve Preston said Wednesday. Officials did not have an updated estimate of how many homeowners were likely to qualify, beyond the
Congressional Budget Office's estimate from earlier this year that 400,000 borrowers would participate.
The program, dubbed
'Hope for Homeowners,' was passed by Congress this summer as part of a massive housing bill. It is one of several government efforts to stem the mortgage crisis.
Critics, however, call the government's actions sluggish and inadequate. Earlier action to modify loans, they say, might have prevented a
$700 billion financial industry bailout now being debated in Washington.
On Monday, a group of state banking and law enforcement officials released a report that said nearly
80 percent of borrowers with subprime loans as were not on track for assistance to avoid foreclosure as of May.The report by the
State Foreclosure Prevention Working Group criticized the lending industry for making only small changes to loan terms and noted that about one in five loans that were modified over the past year became delinquent again.
"While banks and Wall Street firms continue to
report record write-downs of mortgage loan portfolios and securities, the losses do not appear to be flowing down to homeowners in the form of sustainable loan modifications,"
Iowa Attorney General Tom Miller, a founder of the state effort, said in a statement.
