Obama Administration Expands Housing Aid Plan

The Obama administration said Tuesday it is expanding its plan to stem the housing crisis by offering mortgage lenders incentives to lower borrowers' bills on second mortgages.

Obama administration launches effort to aid troubled borrowers with second mortgages.

While home prices soared, such mortgages were even extended to borrowers with poor credit scores and people who didn't provide proof of their incomes or assets. That's because borrowers who are trying to get their primary mortgage modified at a lower monthly payment need the permission of the company holding the second mortgage.

The new incentives are estimated to help up to 1.5 million borrowers with second mortgages, Housing Secretary Shaun Donovan said.

As an incentive to modify second loans at lower interest rates, mortgage companies would get $500 upfront for each modified loan, plus $250 a year for three years as long as the borrower doesn't default.

Lenders would also be given the ability to remove second mortgages entirely in exchange for larger government payouts. The administration also plans to give mortgage companies $2,500 payments to entice them to participate in the "Hope for Homeowners" program.

Sources:
By ALAN ZIBEL AP Real Estate Writer
WASHINGTON April 28, 2009 (AP)
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