WASHINGTON — The Obama administration kicked off a new program Wednesday that's designed to help up to 9 million borrowers stay in their homes through refinanced mortgages or loans that are modified to lower monthly payments.
The Treasury Department released detailed guidelines designed to let the lending industry know how to enroll borrowers in the program announced last month.
"It is imperative that we continue to move with speed to help make housing more affordable and help arrest the damaging spiral in our housing markets," Treasury Secretary Timothy Geithner said in a statement.
The administration, launching what it calls the "Making Home Affordable" initiative, said that borrowers will have to provide their most recent tax return and two pay stubs, as well as an "affidavit of financial hardship" to qualify for the $75 billion loan modification program, which runs through 2012.
Borrowers are only allowed to have their loans modified once, and the program only applies for loans made on Jan. 1 2009 or earlier. Up to 4 million borrowers are expected to qualify. Mortgages for single-family properties that are worth more than $729,750 are excluded.
Separately, up to 5 million borrowers who have mortgages held by government controlled mortgage finance giants Fannie Mae and Freddie Mac should be eligible to refinance through June 2010.
Meanwhile action to put in place another part of Obama's housing plan is expected soon on Capitol Hill.
House Democrats, under pressure from a group of moderates in their ranks and the banking lobby, agreed Tuesday to narrow legislation that gives bankruptcy judges the power to force lenders to lower the interest rate or principal of mortgages for troubled homeowners.
Under the terms of the agreement, judges would have to consider whether a homeowner had been offered a reasonable deal by the bank to rework his or her home loan before seeking help in bankruptcy court. Borrowers also would have a responsibility to prove that they tried to modify their mortgages.
The compromise legislation was expected to come to a vote in the House as early as Thursday.