Loan Mod Plan Gets a Boost from Congress

The Federal Housing Administration (FHA) unveiled plans Thursday for wider assistance to troubled borrowers of FHA-backed loans.

Mortgage and down payment

The FHA plan will strive to cut monthly payments by utilizing partial claims, in which principal payments are deferred through a subordinated interest-only lien. Mortgagees under the new plan are eligible for up to $1,250 of incentives, including $500 for partial claims and $750 for loan modifications. In return, they must agree to waive all late fees and cover the cost of a borrower credit report.

“Today, we’re bringing another important tool to the table to help struggling families who are desperate to keep their homes,” Donovan said. “This is just the latest tool we are providing to help homeowners prevent foreclosures through the Making Home Affordable program.”

The measure was applauded by representatives of both parties as a key source of assistance for those hit hardest by the economic downturn.

“If we fail to act today, our people, our states and our economy will be harmed,” Rep. John Lewis, D-Ga, told The Associated Press.

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