The Obama administration announced on Saturday that it will be expanding eligibility for its Home Affordable Modification Program, according to CNN Money.
The expansion will open its doors to borrowers with higher debt loads and triple the incentives to private lenders and banks to reduce the principal on loans. The program was originally supposed to end this year but has been extended to December 2013.
HAMP was designed to help more than 4 million homeowners when it was introduced, but to date it has helped fewer than a million.
From CNN Money:
Here's a rundown of the new changes:
Expansion of eligibility: HAMP was designed to bring the debt ratio of mortgage borrowers down to 31% of their incomes. Those whose mortgage payments were already below that level had been ineligible for a modification. They may qualify now. The new guidelines will allow for a more flexible approach that takes other debt into account when calculating debt-to-income ratios.
Extension of eligibility to owners of rentals properties: The old HAMP rules applied solely to owner-occupied homes but now those who own rental properties may also qualify for a HAMP modification.
Triple balance-reduction incentives: The new HAMP will pay between 18 cents and 63 cents for every dollar that lenders take off the mortgage principal, up from between 6 cents and 21 cents.
Pay Fannie and Freddie the same incentives: Currently, Fannie Mae and Freddie Mac do not offer principal reduction plans as part of their HAMP modifications. To encourage this assistance, Treasury said it will pay the same principal reduction incentives to Fannie Mae or Freddie Mac if they allow servicers to forgive principal in conjunction with a HAMP modification.
Read more at CNN Money.