Tuesday, January 31, 2012 / by Nathan Clark
The Obama administration seeks to bolster its Home Affordable Mortgage Program by widening the qualification standards and by increasing incentives to lenders to reduce principal balances on home loans.
The unveiled changes include less strict qualifying standards as far as homeowners’ debt-to-income ratio, which was formerly set at 31 percent; the broadening of the program to also include owners of rental properties – the program had been restricted to owner-occupants; a tripling of incentives to banks that reduce principal balances; and incentives to Fannie Mae and Freddy Mac to include reduction in principal balances on loans they back.
The program has also been extended through the end of 2013; it had been set to expire at the end of this year. When it was first rolled out, HAMP was expected to help 4 million homeowners avoid foreclosure, but statistics show that only about 1 million homeowners have been helped.
The changes are expected to go into effect at the end of April. No new funding is expected to be required, as only about $10 billion of the original $29 billion earmarked for the program has been spent.