HUD Expands Program for Troubled Mortgages

Washington, DC, Nov. 20, 2008--The federal government announced plans Wednesday to modify a program to make it easier for troubled homeowners to exchange problematic mortgages for more inexpensive ones.

The new expedited regulations will expand on the Housing and Urban Development Department's Hope for Homeowners program.

The changes will give lenders a greater incentive to participate, by allowing them to write off less of the loan value than under the previous rules. Homeowners will benefit from lower monthly payments, but the loan's term may be extended to as much as 40 years. The provisions will change the rules based on "Hope for Homeowners" legislation passed by Congress in July.

Under the new rules, homeowners won't have to spend more than 31% of their monthly income on their house payment. For the lenders, the rules will allow them to write down a loan to 96.5% of the home's actual value, rather than to 90% as under the old rule.

"These modifications should increase lender participation and help more families who are having difficulty paying their existing mortgages, but can afford a new affordable loan insured by HUD's Federal Housing Administration," said HUD Secretary Steve Preston.